HC Deb 10 May 1988 vol 133 cc149-57 3.31 pm
Mr. Conal Gregory (York) (by private notice)

To ask the Chancellor of the Duchy of Lancaster if he will make a statement on his policy towards the threatened Swiss takeover of Rowntree plc.

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Kenneth Clarke)

Nestlé'sbid for Rowntree and Suchard's 29.9per cent. holding are being considered in the normal way by the Director General of Fair Trading, who, under the Fair Trading Act 1973, is responsible for advising my right hon. and noble Friend on the question of reference to the Monopolies and Mergers Commission.

Mr. Gregory

The overwhelming view of shareholders and employees is that Rowntree can best develop as an independent group, and in no way does the offer from Nestle reflect the value of Rowntree's unique range of international brands. Does the Department of Trade and Industry policy consider the Swiss bid a fair one in terms of free competition? The Swiss group can lower the drawbridge and seize in dawn raids assets built up over many years, returning to an impregnable castle. Is it reasonable to allow a predatory bidder to shelter behind its national law, which enables Swiss companies to insulate themselves against hostile bids?

Secondly, has the Department of Trade and Industry policy differed with regard to 1992, in so far as Rowntree has already got a wide policy towards that date and yet it appears that there is not a Government policy related to the European aspects of that?

I should be very grateful if my right hon. Friend could respond to those questions and the wider employment issues that are at stake in this hostile bid.

Mr. Clarke

I am grateful to my hon. Friend for letting the House have his views, as he has let my right hon. and noble Friend and myself have them over the past few days. I am sure that he will continue to do so. My right hon. and noble Friend cannot make a decision about this until he has received the advice of the Director General of Fair Trading, who will give his advice as soon as he can about the public interest in this case and the effects on competition in the United Kingdom, in particular.

With due respect to my hon. Friend, I do not think that the price being offered for the shares will be a matter for my right hon. and noble Friend or for the MMC, if any reference is made. The other matters he raised could certainly be relevant and will be considered.

The question whether Rowntree could make a reciprocal bid could be relevant in some circumstances in cases of this kind. I have no doubt that the Director General will consider its relevance in this case. There are, as a general proposition, very many cases in which bids are made and in which the company at the receiving end of the bid is in no position to make a reciprocal bid, against a small private company, for example, or one where the shares are in a few hands.

With regard to 1992, this country, like the other members of the European Community, will be made a much more attractive place for investment. We are expecting a great deal of inward investment to be attracted into the European Community, and we want to see a lot of that coming to this country, both on green field sites and in terms of acquisition. We need not fear a loss to our sovereignty through an inflow of capital because, apart from the Japanese, the British remain the principal outward investors in the world.

This case will be looked at on its merits as a single case. My right hon. and noble Friend will decide what the public interest is once he has received the advice of the Director General of Fair Trading, and I am sure that he will consider carefully all the representations of my hon. Friend and those of other hon. Members with an interest.

Mr. Doug Henderson (Newcastle upon Tyne, North)

Is the Minister aware that while his Department dilly-dallies, the City speculates and a major British industry is put at severe risk? Importantly, it is the jobs in the north—in Newcastle, York and Castleford—where we really need them, that are in danger. Is the Minister further aware that the board of the company is beginning to think that it will have to compete with some of the cuts that Nestlè's has threatened, that there is an acute nervousness among the work force up and down the country, and that management and work force want a decision? If they do not have one this week, there may be no decision to make.

Mr. Clarke

My Department and my right hon. and noble Friend are certainly not dilly-dallying; we are complying with the law. The first step is to get the advice of the Director General of Fair Trading, who has to be given the time to give sensible and well-considered advice. There is no question of the whole matter being overtaken by events because, for example, were a controlling interest to be acquired in the meanwhile, if a reference were made to the Monopolies and Mergers Commission there would be powers to require a subsequent disinvestment. Therefore, there is no danger of a fait accompli being presented to us all. The fact is that this matter is following its ordinary course.

I understand the uncertainties among the work force. Whenever there is a question of a merger or a takeover, uncertainty is always bad for anybody and unsettles people. There is no immediate and obvious risk to jobs because most people do not think of acquiring companies within the EC in order to move manufacturing and jobs outside the EC. That would be somewhat contradictory. I ask the hon. Gentleman to bear in mind that Nestlè's is already a major investor and employer in Britain, and a welcome one. It employs about 10,000 people, the bulk of them in the north of England and Scotland.

Mr. Leon Brittan (Richmond, Yorks)

Does my right hon. and learned Friend agree, however, that if there were to be any question of disinvestment in the future, that would be immensely disruptive, so there is some urgency in the matter in view of the share purchases that are taking place extremely actively at the moment, and that, while the normal procedures have to be followed, they can and should be expedited in this case?

Mr. Clarke

I agree entirely with my right hon. and learned Friend. Plainly, everybody wants the uncertainty brought to an end as quickly as possible and any subsequent order to disinvest could be disruptive. We are awaiting the advice, of the Director General of Fair Trading, who has had the matter in his hands for only the last week. I am sure that he appreciates the urgency of putting forward advice, and my right hon. and noble Friend will respond as quickly as possible. The matter should be sorted out within a reasonable time.

Mr. Bruce Milian (Glasgow, Govan)

Is the Minister aware that I have a constituency interest because Rowntree's Gray Dunn factory is located in Glasgow and there is apprehension there, as elsewhere, about the employment implications of any takeover? The Minister mentioned new investment in the United Kingdom, but what is involved here is not new investment but a straight takeover. It is another case of a foreign competitor attempting to swallow up a major British company. It will be completely unacceptable if that is allowed to happen without a reference to the Monopolies and Mergers Commission.

Mr. Clarke

I have already said that I understand how worrying such uncertainty is for people who work for a major company. That is why I have just agreed with my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan) that we all wish to see a decision arrived at as quickly as possible, but that has to be as quickly as the law allows, given the need to wait for the advice of the Director General.

Leaving aside this case, I do not agree with the right hon. Gentleman's broad proposition about foreign predators taking over British companies. The British economy benefits from the fact that we are open and welcoming to inward investment. We also benefit greatly from the outward investment. The Labour party can never make up its mind. When there is British investment overseas it says that jobs are being exported, and when there is investment in Britain it says that wicked foreigners are taking over our firms. The right hon. Gentleman might work on the Swiss trade unions to see whether they will agree with his party and start complaining to the Swiss about the export of jobs.

Mr. Patrick Thompson (Norwich, North)

In considering the representations, will my right hon. and learned Friend take seriously the concern which has been expressed by many of my constituents in Norwich, North who work in the Rowntree factory in Norwich? Will he consider carefully the representations which have been made to him today and earlier about possible reference to the Monopolies and Mergers Commission and, indeed, about the asymmetry between the position in Switzerland and that in this country?

Mr. Clarke

I can assure my hon. Friend, as I have assured hon. Members on both sides, that we certainly will. Obviously we must have a decision as quickly as possible about where the public interest lies. As I have said, differences between Swiss law and British patent law may be relevant in some circumstances, although with many takeover bids there is no prospect of a reciprocal bid by the company at the receiving end.

Mr. Malcolm Bruce (Gordon)

Is it not a fact that if a British company chose to make a bid for Nestlés, the Swiss Government would block it, and that if the takeover goes ahead it will not be reversible? Will the Minister make it clear that the takeover of Rowntree involves not just a loss of jobs in the north of England but the loss of a corporate headquarters, and that regional policy demands that corporate headquarters should be retained in the regions? Should not that be a factor to be taken into account by the Monopolies and Mergers Commission?

Mr. Clarke

I will check, but I think that the hon. Gentleman's view on Swiss law is wrong. I do not think that the Swiss Government would step in to stop any takeover. There are curious features in Swiss law which restrict the ability of foreign companies to buy Swiss companies when the Swiss company is hostile. So far, I have been able to trace more British acquisitions of companies in Switzerland than Swiss acquisitions of companies in Britain in 1987.

All this is leading to, not a decision on my part—because I do not take it—nor by my right hon. and noble Friend but simply a request to the House to understand that the legal position is that we must consider this case on its merits and decide what the public interest is. My right hon. and noble Friend will decide that as quickly as he can once he has the advice of the director general.

Sir William Clark (Croydon, South)

My right hon. and learned Friend should not be stampeded into a decision on this important matter. Is he aware that Nestle has its headquarters in Croydon? As he rightly says, it is a very good employer, employing more than 10,000 people in this country. Does he agree that the amount of overseas investment that our industrialists have made overseas, particularly in America and Europe, has not only boosted the invisible earnings of this country but has also given us an entree into the export markets of other countries? Does he agree that it would be a great mistake to hamper the mobility of investment because that is the only way to keep the economy strong?

Mr. Clarke

My hon. Friend has made an authoritative and clear statement on the principles that should guide us and on the benefits which flow from an open investment policy, subject to the provisions of the fair trading legislation which will have to apply in this case. He has also identified the headquarters of the company; that will solve a mystery for a large number of people. Most of my constituents thought that the company was called "Nessalls" and did not realise that it was a foreign company until the fuss suddenly arose.

Mr. Merlyn Rees (Morley and Leeds, South)

Is the Minister aware that some of us, with significant numbers of employees of Cadbury Schweppes plc in our constituencies, have been written to by Sir Adrian Cadbury, who has pointed out that not only may irreversible decisions be taken about Rowntree, which concerns us much in Yorkshire, but possibly similar decisions about Cadbury—

Mr. Speaker

Order. The question is about Rowntree.

Mr. Rees

I know that it is in Croydon, but Cadbury is in my constituency.

Mr. Speaker

The private notice question is about Rowntree, not Cadbury.

Mr. Clarke

If chocolate is encompassed vaguely by the exchange, Mr. Speaker, I can tell the right hon. Gentleman that my right hon. and noble Friend decided this morning not to refer to the Monopolies and Mergers Commission the General Cinema stake in Cadbury because there seems to be no threat to competition or to the national interest in that bid. That is a coincidence. Apart from the fact that both companies make chocolate, there is no link between them. The two cases will be considered and decided on separately. The decision on Rowntree will be made when we have received the advice of the Director General of Fair Trading.

Mr. Tim Smith (Beaconsfield)

Is not the key fact in all this the information that my right hon. and learned Friend gave the House earlier—that after nine years of rising overseas investment, the United Kingdom is now the second largest overseas investor after Japan? Should we not think carefully before taking action that might prove wholly counter-productive, leading possibly to an international investment protection war?

Mr. Clarke

I agree with my hon. Friend. Nothing could be more absurd than the general proposition that British capital should not be invested in foreign firms, or that foreigners should not be allowed to invest here. That would do a great deal of damage. On the other hand, the British Government must look after the national interest by determining what is the public interest in a particular case and what is the effect on competition in the British and European market of any proposed merger. That is what we shall do in each case, without being guided by national prejudice.

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

Is the right hon. and learned Gentleman aware that I have a constituency interest in an area that has lost its major industry—mining? The Rowntree factory in my constituency is one of the major employers, and the vast majority of the work force there are very concerned.

Is the right hon. and learned Gentleman also aware that, at a meeting last night, the chairman of Nestlé failed to give any guarantee that there would not be job losses? If he cannot give such a guarantee to the director general, and if jobs will be lost, is that against the public interest, and will the Minister refer the case to the MMC?

Mr. Clarke

All these comments will be borne in mind by those who have to advise and then take the decision. As I have said, it should not be automatically assumed that there is a threat to jobs in any particular bid—certainly not jobs in general. There have been large job losses in acquisitions and mergers between British companies in this country. All companies, regardless of ownership, have to make sure that they make and keep themselves cost-effective in the European market in the sort of goods we are talking about. The Government must encourage the freest possible movement of capital, but make sure that the public interest is not being threatened by any acquisition, from whatever source.

Mr. Michael Heseltine (Henley)

Is my right hon. and learned Friend satisfied that the guidelines issued to the monopoly and mergers operations are now sufficient to relate to the target of 1992, by when the European market is scheduled to be completed? Will he agree that in any revision of any guidelines we need to be concerned with fairness in the market place? It is very hard to square fairness to compete within the market place with the fact that British companies can be acquired by Swiss companies but it is difficult for the reverse process to take place.

Mr. Clarke

We have just issued a recent document on monopolies and mergers policy, which I am sure my right hon. Friend has seen. We are always open to proposals that it should be revised. The powers that we retain are the broadest possible and necessary ones to look after the public interest as, in the end, my right hon. and noble Friend determines it. It is an inevitable consequence—and, in my opinion, a desirable one—of 1992 that there will be an increase in the flow of inward investment into this country. Indeed, we shall be competing for the largest possible share of that inward investment with the other 11 Community members.

The position vis-à-vis reciprocity and Switzerland can be relevant in some circumstances. However, it is arguable that it is the Swiss who are imposing a burden upon themselves by, to a certain extent, closing their market as a result of second world war legislation. No one wants to introduce similar legislation in this country: it would cut out desirable inward flows of investment.

Mrs. Alice Mahon (Halifax)

Does the Minister appreciate that the consideration of jobs is paramount in towns such as mine, which is the home of Quality Street? Does he realise that Rowntree has been an integral part of the community, as well as Mackintosh? The regeneration of my town is built around the Civic Trust initiative, which incorporates Quality Street, so will he give an early decision on this? The anxiety felt by the employees of Rowntree in Halifax is unbelievable. They have already gone through the trauma of the early 1980s, when the work force was cut by 1,500. There is real fear in Halifax that we could lose our last large private employer.

Mr. Clarke

The hon. Lady correctly expresses the anxiety that is undoubtedly felt in Halifax. I can assure her that it is appreciated by my right hon. and noble Friend and everyone involved in the decision. I agree with her that we need the quickest possible end to the present uncertainty. The general fear that this automatically leads to job losses should not be unnecessarily aroused; nor need the reference to an overseas company alarm people when they realise that it is based in Croydon and is the owner of such well-known names as Crosse and Blackwell and such British products as Branston pickle. Therefore, there is room for a broad economic and public interest judgment to be made in this case, and there is no need for needless fears to be roused excessively at this stage.

Mr. Kenneth Warren (Hastings and Rye)

I recognise that the Office of Fair Trading needs time, but may I encourage my right hon. and learned Friend to get the director general to burn a little midnight oil, because he is taking rather a long time to come to a decision about a contentious bid? In such contentious bids, is there not a case for examining the legal position to see whether we can change the system whereby predatory trading can continue on the stock exchange while the Office of Fair Trading is considering a matter?

Mr. Clarke

I shall draw my hon. Friend's remarks to the attention of the director general, although I think that he is being a little severe. If the director general has had the offer for over a week, it is for only a little over a week, and I am sure that he appreciates the need to give advice as soon as he reasonably can; but he must study the matter. I have already said that any trading on the stock exchange does not exclude, if necessary, the exercise of the necessary powers in the end if, after reference, it is proved to be contrary to the public interest. The recent reference of the Kuwaiti acquisition in BP was after the acquisition of a substantial number of shares. It does not bind the hands of those who ultimately have to decide what to do in the light of any ruling from the Commission.

Mr. Doug Hoyle (Warrington, North)

Does the Minister realise that there are 13,000 employees who are extremely concerned about this? Does he realise that the brands are very similar, so if the merger goes ahead rationalisation is bound to take place? Is he not taking a cavalier view of the Swiss legislation? If Rowntree cannot make a bid for Nestlé, the same should apply in this country. Does not the Minister realise that if the bid for Cadbury Schweppes goes ahead, along with that for Rowntree, 90 per cent. of our chocolate confectionery production will be owned by American or Swiss interests? Does not that concern him?

Mr. Clarke

I hope that I have made it clear that I entirely share the concern. The law does not allow me to announce any decision on the part of my right hon. and noble Friend. It would not be right for my right hon. and noble Friend to reach a decision, which he has not, until he has the advice of the director general. As I have said, the main purpose of acquisition by, say, Japanese companies in this country is not to move employment abroad but to provide a base for manufacturing and employment in this country. I am merely making propositions that stop people raising needless fears about foreigners buying our companies. I am a little cavalier about Swiss legislation because I am a British legislator, not a Swiss legislator, and it is not within my power to reform the law of Switzerland.

Mr. Patrick McLoughlin (Derbyshire, West)

Is my right hon. and learned Friend aware that as the Nestle company is mainly a grocery company and Rowntree is mainly a confectionery company there is no clash of interests? Is he also aware that the Nestlé company has operated in this country for over 120 years and is the employer of more than 10,000 people here?

Mr. Clarke

I am aware of that, which is why I am relieved that nobody has yet demanded that Nestlé disinvest itself of what it already has, or shed the employment in this country. My hon. Friend has made some valid points, which no doubt will be considered along with the counter-points that some of my hon. Friends have made before my right hon. and noble Friend eventually makes his decision.

Mr. Dafydd Elis Thomas (Meirionnydd Nant Conwy)

What does the term "public interest" imply when the Minister uses it in this context? Does it imply the regional policy considerations that have been mentioned, or is it a much broader based appreciation, and not the kind of strange English nationalism which we have seen as part of the debate in the House and in the media?

Mr. Clarke

"The public interest" is, fortunately, a broad brush description and no doubt it could, if necessary, be used to encompass almost any decision that one pleased. However, Governments cannot act arbitrarily, so we have issued guidelines about the basis on which we think decisions should be taken in these matters. I commend the recent publication on monopolies and mergers to the hon. Gentleman, and he will see that it is free of English nationalist or any other prejudice of the kind that he fears.

Sir Giles Shaw (Pudsey)

I declare an interest as I had 19 years' employment with Rowntree. I fully understand the point that my right hon. and learned Friend has made about the difficulty of arriving at any view until proper consideration has been given to the matter. Will he recognise, in his comments about reciprocity between Swiss investment and that in the United Kingdom, that a hostile bid in Switzerland would be blocked? There can certainly be agreed investment—that is no problem. Insofar as the Rowntree company has had two predatory investments made by Swiss companies, both of which are regarded as hostile, the situation is clearly unfair. Does my right hon. and learned Friend agree that, in regard to his 1992 campaign to provide a base within which the United Kingdom can take its full share of the European opportunity, such hostile bidding under present conditions is little short of uncompetitive?

Mr. Clarke

I know that my right hon. Friend made his career in Rowntree before he came to the House. He is well informed about the company, and I understand that he is also well informed about Swiss law. He states the position accurately. The points he made about fairness, which were also made by my right hon. Friend the Member for Henley (Mr. Heseltine), are relevant in some circumstances. That is one of the principal matters that the director general is considering, and on which we shall have to reflect when we get his advice.

Mr. Tony Blair (Sedgefield)

Does the Minister realise that at the very least a reference to the Monopolies and Mergers Commission allows some pause for scrutiny and for the public interest considerations to be examined? Will he accept that we are not talking only about one company; we are talking about the future of an entire region and whether Rowntree remains one of the few independent companies based in the north? Does he know that more than 12,000 people are employed in the company, and is it not high time that the views of the thousands of people who work for the company are held in as much account as those of a score of institutional power brokers in the City of London? Does he agree that, in the event of a hostile bid, Swiss law does not allow a reciprocal bid in the same way as it is allowed under British law?

Does the Minister realise that, as we are now in the run-up to 1992 and we are starting to see the profound pervasive impact of that in every area of industry and commerce, and as in the past two years nearly 70 Euro-mergers have taken place across the frontiers of Europe, this decision will mark a watershed in Government policy? When will the Government understand the critical importance of a coherent industrial policy for Britain which does not put the folly of the free market before the interests of the nation?

Mr. Clarke

First, I disagree with the hon. Gentleman that a reference to the Monopolies and Mergers Commission would provide a pause. We have to decide whether to refer the matter to the Monopolies and Mergers Commission. Many hon. Members who have taken part in these exchanges have pointed out the need to end uncertainty as soon as possible, so a decision is required on whether to refer the matter in the public interest. It is no good putting it off. Delay would be considerably unsettling.

I agree with the hon. Gentleman about the views of employees, and among all the considerations that we shall take into account obviously my right hon. and noble Friend will have regard to the views that have been put forward today by those hon. Members who represent the employees of the company. All that will be relevant to the consideration that we have to make as quickly as possible.

I shall not repeat what I have already said about 1992, but I think that the hon. Gentleman must think through what he means by 1992. In the run-up to 1992 it will be more difficult, not less difficult, to take a closed, little England view of outward investment, or inward investment into this country. It will be a long and difficult task, but I would commend to Opposition Members a little thinking through of the opportunities of 1992, and the change in the economic climate that 1992 will produce.

For that reason, I do not accept that this is a watershed decision for the future of industrial strategy. That would mean that we should all be seized with excitement about whether it is right or wrong for foreigners to own our chocolate companies. It is an extremely important decision from the point of view of those who work in the chocolate industry, the consumers and the national economy. It will have to be taken dispassionately on the best advice that we can get and it will be taken by my right hon. and noble Friend when he has the advice of the Director General of Fair Trading.

Several Hon. Members


Mr. Speaker

Order. I have carefully noted those hon. Members who have not been called. Perhaps there will be a further opportunity tomorrow to discuss this subject during Trade and Industry questions, and I shall bear them very much in mind.