ALEX BRUMMER: The private equity onslaught is eroding British tech and the country’s tax base

There is currently a lot of focus in Whitehall and the City on rebuilding confidence in Britain as a great place to list companies.

However, it’s all a bit hopeless when UK long investors are so thinly spread due to pension fund withdrawals, weak stewardship and the onslaught of private equity.

The very biggest deals, such as those for supermarkets Morrisons and Asda, may be off the table due to rising financing costs, but second-tier deals keep coming, draining listed markets, eroding British technology and the country’s tax base.

Virgin Media 02, owned by Liberty Global, is an example of a proposed base shift to Bermuda, potentially undermining shareholder democracy and UK taxation.

By using the National Security and Investment Act more aggressively, the authorities could make it more difficult for foreign private equity buyers to snare British companies.

The £4.5bn unopposed bid for veterinary pharma group Dechra by Swedish private equity firm EQT is just the latest in a series of such deals.

Payment company Network International Holdings, stock exchange specialist Hyve and healthcare provider Medica are all companies in growth areas of the British economy.

The UK is a private equity honeypot due to its below-octane listed values, a reputation for receptive open markets and limp boards ready to take the money and run.

Higher cash costs may have made the biggest deals less fashionable, though Dechra is no minnow.

Data provider Preqin reports that private equity has a whopping $2.5 trillion — that’s not far short of the UK’s national output — in unspent funds.

In the first five months of this year, nine UK-listed companies have received buyout offers worth a combined £6.5 billion, which is more than the totals for all of 2021 and 2022.

The biggest to get away is Apollo’s bid for Aberdeen-based oil engineer John Wood, who received five approaches.

UK companies are attractive because they are relatively undervalued and, unlike many of their continental counterparts, there is a clear international focus.

Selling global ambition when both the Tories and Labor want to boost growth is economic vandalism.

Black gold

Bond traders penalized two-year UK government bonds in the latest trading, with yields rising as high as 4.45 percent.

The rise in government bond yields, across all maturities, will hurt homeowners looking to refinance their fixed-income deals.

Sentiment turned against British bonds after Saudi Arabia tightened oil production, aiming to support falling prices.

The UK is seen as particularly vulnerable to higher energy costs due to disappointment over the Bank of England’s inability to get a grip on inflation.

However, the reality is that Opec plus one (Russia) is a much less effective force at dictating raw costs than it once was. Prices have risen since the Saudi decision.

Just like when Opec last tried to push prices to $80 a barrel, there is no confidence that the rise can be sustained.

A big difference is the United States. The US may be pushing for climate change targets, but the administration has so far failed to prevent domestic resources from pumping more and more.

The most recent data shows a record 12.7 million barrels were produced in March 2023, about 40 percent of which came from West Texas.

After the war against Ukraine, the Americans are the largest suppliers to Europe, surpassing producers in the Middle East.

American uber-capitalism finds it possible to accommodate the idea of ​​a push for more carbon-free investment while pumping more and more oil.

Britain could learn some lessons if it ravages North Sea producers with windfall taxes and Labor threatens to end all future drilling.

Take the lead

Diageo’s new CEO, Debra Crew, would no doubt have preferred a more relaxed introduction to the top position at the beverage group.

She was parachuted a month earlier after her illustrious predecessor Ivan Menezes, who was in charge for ten years, fell ill.

Bold in his ambition, he was responsible for investing in new distilleries in Scotland, developing the totemic Guinness label, reshaping the company’s presence in India and investing in growth liqueur brands.

As a veteran of the United States Army, we trust Crew to remain true to her former commanding officer’s formidable British and Irish legacy.