ALEX BRUMMER: Weak enforcers betray Britain

The wheels of commerce are turning faster and faster with a rush of FTSE 350 takeover bids. But the election campaign will usher in a period of regulatory purdah.

Czech billionaire Daniel Kretinsky’s attempt to swallow up International Distributions Services (IDS), owner of the Royal Mail, is unlikely to make much headway in such circumstances.

Elsewhere, Ofwat’s review of Thames Water’s pricing plans, key to unlocking new equity investment in the troubled utility, is effectively on hold.

Excessive use of debt financing has hampered investment by Britain’s privatized water companies. But it has not stopped payouts to investors and is one of the factors behind unscrupulous wastewater discharges, as an investigation in The Mail on Sunday will reveal tomorrow.

Weak and inconsistent regulation of the privatized utilities has been an ongoing theme in recent years, raising questions about whether the Thatcher revolution, which was copied around the world, was a mistake and whether public services, which are natural monopolies, should remain in state hands.

Rail, water, energy and the universal service obligation for the Royal Mail clearly play an important role in all our lives.

In the budget battle between the Treasury and other ministries, requests for major capital expenditure, such as renewing hundreds of kilometers of centuries-old water pipes, would not stand a chance against the funding needs of the NHS, state pensions and crumbling schools. .

Labor recognizes this. Keir Starmer’s state-owned Great British Energy is intended as a means of attracting three times as much private investment for every pound of state capital.

On hold: Ofwat’s review of Thames Water’s pricing plans, key to unlocking new equity investment in the troubled utility, has been effectively put on hold

The answer to tackling long-standing problems of privatized companies is therefore better and more joint thinking. In the case of water, the three different authorities – Ofwat, the Environment Agency and Defra – coordinate poorly.

In telecommunications and postal services, Ofcom has proven to be an effective regulator, alert to technical problems. The government’s dragging of a postal services scheme is one of the factors that exposed the Royal Mail to overseas ownership.

The tendency of British boards to turn around at the first smell of cordite and submit to takeovers abroad or private equity has diminished.

A range of listed companies, including the Wood Group, Anglo American, Hargreaves Lansdown and, in the recent past, Direct Line and Currys, have delayed, thwarted and repelled looters.

What’s more worrying are the deals that have fallen through the cracks. Britain allowed its defense, security and innovation to be reduced.

A combination of a ‘London discount’, a weak pound, complicit management and government indifference saw parts of the defense sector – Cobham, Ultra Electronics and satellite company Inmarsat – fall into foreign hands.

Valuable AI, software and pharmaceutical companies, including Aveva and Dechra Pharmaceuticals, have been snapped up. British Steel’s hull fell to Jingye, China.

The National Security & Investment Act of 2022 was intended to prevent such travesties, which have had a lasting impact on our capacity for growth, innovation, and tax revenues.

Unlike its American counterpart, the Committee on Foreign Investment (CFIUS), the British watchdog rarely barks.

At this point, it could have a major impact on sales of both cybersecurity specialist Darktrace and Royal Mail owner IDS.

President Biden recently called on CFIUS to delay or even stop a Japanese takeover of US Steel on national security grounds.

Britain has proven to be a reluctant user of similar powers. It merely flexed its muscles to prevent chipmaker Newport Wafer Fab from falling into Chinese hands.

There is a reluctance to erect barriers against foreign takeovers because they suggest the country is not open for business.

The result is a dangerous erosion of our technological lead and of control over vital companies.

The Tories have too often neglected the public interest by failing to strengthen the backbone of regulators and police takeovers.

Labour, in opposition, has hardly been better. British prosperity requires a government that values ​​enforcement.