More Industrial Defeat Looming

As commented on by Stephen Bush in the Sunday Times of 24 March, the government is preparing to sell the UK’s one third stake in URENCO, the nuclear fuels manufacturing business, which while foreshadowed by many hints, is still shocking.

URENCO is owned by the British and Dutch governments (33⅓% each) with the remaining third belonging to the German companies E.ON and RWE.  Earnings before interest, tax and depreciation (EBITDA) were €785 million in 2011 (around £650 million) with an order book exceeding £17 billion, and capital expenditure of about £600 million in 2011.  At a price-earnings ratio of say 14, in line with established FTSE manufacturing companies, this gives a market value of probably £9 billion – placing it at around number 40 in the top 200 London Stock Exchange companies.

For all its talk of rebalancing the British economy towards manufacturing and exports, here is another British hi-tech manufacturing asset with an order book in billions of pounds about to join that other former British nuclear asset, Westinghouse, in foreign hands.  Those who claim that ownership of productive assets doesn’t matter, only their location, couldn’t be more wrong.  Where forward planning and investment is concerned, foreign owners always give priority to the interests of their home countries, even if many British corporate bosses do not.

Here is an opportunity to acquire the whole of URENCO for Britain.  Predictably the French nuclear energy company Areva which will build the Hinckley point nuclear power station if EDF decide to go ahead, is said to be seeking capital to make a bid. If successful, France will have acquired the best fuel manufacturing technology and production assets in the world and will have been given a stranglehold on Britain’s new nuclear programme.

There is no British bidder in sight.  The Canada Pension Plan, Canada’s largest private pensions manager, is weighing a bid for an energy asset which will yield a steady long-term income in a rising market – perfect one would have thought for a City-based pension fund.

The City prefers Portfolio investment because it’s the easy way to invest and collect management fees.  But the figures in Stephen Bush’s post of 19 March (Table 3) show how poor portfolio returns (2.5% in 2011) for the capital providers actually are, compared with direct investment in particular companies (8.7% in 2011).

Still, here is a chance for the City to show that it can put together the financial resources to acquire the whole of URENCO for Britain, while the Chancellor gets about £3 billion to spend on another six weeks of housing benefit.  If the City does not rise to the occasion – at once useful and patriotic – one is bound to ask what is it for?

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