Commentary: Britain: Colonized And Loving ItStanley Reed
On Oct. 27, Vickers PLC, the defense company, put its prestigious but not-too-profitable Rolls-Royce PLC auto unit on the block. Germany's BMW emerged as the likely buyer. The news that a foreign company could wind up owning one of the most prominent symbols of Britishness would have sparked a nationalist uproar not very long ago. But the grumbles were few. "Dry your eyes," was the common take in the press. Sad as it may be, venerable Rolls is better off in the stable of BMW or another well-heeled auto player that can afford it.
For the most part, Britons have stopped caring about who owns what. They don't complain about working for a Japanese carmaker and have grudgingly accepted that their water comes from Compagnie Generale des Eaux. That U.S. electrical utilities have bought many of their British counterparts also is a nonissue. In fact, Britain has become the most accepting of any industrialized country, except maybe the U.S., of foreign takeovers of key industries.
SLICED UP. Britain, with its many thriving subsidiaries of global companies, may prove to be a model for Europe to come. As Europe integrates, some high-profile industries, from autos to finance, could end up under the umbrellas of a few big players. Maybe the Germans, Americans, and Japanese will slice up the auto business; the French could dominate building materials; the Americans, finance. If countries such as France resist this process, they could find themselves permanently out of the loop.
It is ironic that British politicians continue to fulminate over the loss of sovereignty that might come from joining the proposed European Monetary Union in 1999. Much of Britain's economic sovereignty has already fallen by the wayside. Decisions made in the boardrooms of America's General Electric Co. or Japan's Toyota Motor Corp. may have far more impact than those reached in the Treasury or 10 Downing Street. Britain still has trappings of the old days--such as a veto on the U.N. Security Council--but Prime Minister Tony Blair's critical tasks may be keeping taxes low, work rules flexible, and investors happy.
In Britain, few are greatly concerned about the influence of foreign companies because the results so far have been remarkably benign. Margaret Thatcher's economic reforms of the 1980s triggered a foreign investment and buying spree in Britain that is helping to power the current boom. Last year, Britain pulled in $15 billion in foreign direct investment, second only to the U.S. among industrialized countries. The new owners, whether Americans, Germans, or Japanese, are bringing better management and capital to industries such as autos and computers that might have died without them.
Nowhere is that more true than in the car industry, where Nissan, Toyota, and Honda have invested heavily in new plants, while BMW has propped up sagging Rover. Nissan Motor Co.'s crackerjack plant in Sunderland is the most efficient in Europe. Such state-of-the-art facilities have helped boost British productivity growth ahead of all others in the Group of Seven. At the same time, foreign owners are providing thousands of jobs in regions that would be hurting without them.
Meanwhile, Britain's openness to outside capital and ideas is helping a knowledge-based economy take shape in the London area and in hotspots such as Cambridge University. Since the Big Bang in 1986 opened the doors for them, international banks have brought capital and new financial technology to enhance London's position as a global money center. While they may be American- or German-owned, many of their employees are Brits, and they have been taking home fat bonuses. That is why no one is worrying too much about the potential sale of two of the last British investment banks, BZW and NatWest Markets, by their British banking parents. Let someone else try to bring their returns up to snuff, the thinking goes.
U.S. venture capitalists are already roaming British campuses in search of hot startups. Not all of this new economy is high tech or high-paid: Services such as catering, couriering, and office-cleaning are mushrooming. But at least they provide jobs for the huge numbers of Britons with limited skills and education. Blair's fondest vision is that one day the children of such workers will find themselves working in a European Silicon Valley. The trick is keeping the investment funds flowing.