HC Deb 11 November 1988 vol 140 cc330-1W
Mr. Cousins

To ask the Chancellor of the Duchy of Lancaster whether he will estimate the balance of payments effects of cross-border acquisitions, mergers and disposals for each year since 1980.

Mr. Alan Clark

The available information relates to the acquisition and disposal of share and loan capital by United Kingdom companies in their foreign subsidiary and associate companies and by foreign companies in their United Kingdom subsidiary and associate companies. The information differs from that published in the article on cross-border acquisitions and mergers inBritish Business, 28 October, pages 26 to 28 because it includes the acquisition and disposal of associate holdings as well as changes to existing holdings, where a controlling interest already exists. It also excludes transactions in share and loan capital which are indirect, that is, when a United Kingdom company acquires a foreign company through an existing foreign affiliate or when a foreign company acquires a United Kingdom company through an existing United Kingdom affiliate. The information on cross-border acquisitions is available only from 1986 onwards.

There are a number of indirect effects on the balance of payments of these acquisitions and disposals which cannot be quantified separately. They are as follows:

  1. a. The flow of capital into and out of the United Kingdom to raise funds for, or to use the proceeds from, cross-border acquisitions and merger activity.
  2. b. The effects on interest, profits and dividends, credits and debits in the current account of the balance of payments.
  3. c. The effect on visible trade.

The data is as follows.

£ million
Acquisitions and disposals by United Kingdom companies of foreign companies' share and loan capital Acquisitions and disposals by foreign companies of United Kingdom companies' share and loan capital Net direct effect
Gross acquisitions (1) Gross disposals (2) Net acquisitions (3) Gross acquisitions (4) Gross disposals (5) Net acquisitions (6) (3)–(6)
1980 -2,056 264 -1,793 906 -109 797 -996
1981 -2,719 316 -2,403 1,137 -262 875 -1,528
1982 -1,855 940 -915 689 -440 249 -666
1983 -2,484 564 -1,920 690 -134 556 -1,364
1984 -3,771 1,146 -2,625 1,191 -910 281 -2,344
1985 -4,980 1,885 -3,096 1,162 -488 674 -2,422
1986 -8,078 1,402 -6,676 2,633 -1,240 1,393 -5,283
1987 n.a. n.a. -4,518 n.a. n.a. 2,073 -2,445
1988 Q1 n.a. n.a. -1,965 n.a. n.a. 176 -1,789
Q2 n.a. n.a. -1,123 n.a. n.a. 740 -383

Source: Overseas Transactions Inquiry.

Bop signs (-capital outflow; + capital inflow).

Figures prior to 1984 exclude oil companies.