More Surrender

The news today (22nd June) that Thornton’s, the last remaining British chocolate maker of any size, is to be sold to the Italian company, Ferrero Rocher, is yet another example of the sell-off of British capital assets, while the financiers of the City stand by and do nothing.

In a day or so the government and its tame economic supporters will doubtless be telling us that this is another example of “inward investment” when it is nothing of the sort – it is a sale of assets with no suggestion that the buyer will actually bring cash into the country to increase Thornton’s production, which is the only increase which counts.

What will happen is that after a “long strategic (sic) review of Thornton’s assets”, Ferrero will reluctantly conclude that most of Thornton’s factories are too costly to maintain, and will close them, moving the brands to one of its existing factories on the Continent or building a new one in Eastern Europe with cash from the European Growth Fund (previously called the European Regional Development Fund, ERDF), paid for largely by British and German taxpayers.  Foreign companies always close British factories because, egged on by their advisors and banks who stand to make huge fees from a completed acquisition, they overpay to acquire the British company (in Thornton’s case 40% overpaid).

Kraft did this with Terry’s Chocolate Orange at York (went to Poland); Nestlé have done this with all the iconic Rowntree-Mackintosh brands they acquired in 1988 (Rolo, Kitkat, After Eights, Smarties), except Quality Street which is still made in the original Halifax factory.

Implications of these and many other takeovers for Britain

1          The main implication is the British financial system is useless as a source of primary finance or protection from foreign predators.  Needless to say, other countries like Switzerland, Italy and the USA involved in the above takeovers, have major protections in place to prevent their iconic companies falling under foreign control[1].

2          Since the takeover of British manufacturing companies now clearly taking British ownership of major assets to extinction, able young British people will increasingly shun employment with them because they know that being a foreigner in the eyes of the top management, the most they can aspire to would be head of a shrinking British operation.  Thus the decline of British manufacture as a major generator of jobs and exports will become a self-fulfilling prophecy.

What should be done?

1          Competition law should be invoked to block any foreign takeover of a British company in a given sector, where such a takeover would exceed a given percentage (say 40-50%) of British-owned and domiciled manufacturing output in that sector, defined by the International Standard Industrial Classification (ISIC).

2          This would preserve the benefits of competition, but prevent the movement of the main centres of R&D, Production Improvement, and its Sales and Marketing headquarters out of Britain, and out of reach of talented British people, who wish to live and bring up their children in their homeland.

3          A separate provision, but most likely overlapping with 1 and 2, is that where a takeover is permitted by the Competition Commission, there should be a five year embargo on the transfer or sale of any brand acquired by the takeover to an overseas factory owned by any foreign company.

End Note

[1]  Ferrero Rocher is an Italian family-controlled company (like BMW) with indulgent banking partners to finance its investments.  Nestlé is directly protected from takeover by Swiss and Vaud Cantonal law.  Kraft has been protected by the difficulties of selling foreign products of all kinds in the 50 different states of the USA.

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