Opinion: Reeves sells Britain short
The last Chancellor to back an overseas takeover of a British listed company was Conservative Philip Hammond when SoftBank swallowed Arm Holdings in 2016 in the aftermath of Brexit. That went badly for Britain's leading smart-chip designer, which is now quoted in New York. Admittedly, pension consolidator Just Group is not a tech pioneer. But it is a London-quoted company which has accumulated £27billion in pension fund assets, serving some 500 smaller firms.
It is a key player in a sector where the UK's biggest insurers Legal & General and Aviva are leaders. So, it is somewhat bizarre to hear Rachel Reeves trumpeting the £2.4billion takeover by Brookfield as reinforcing her narrative that Britain is good for business. Doubtless the big 75 per cent premium to Just Group's share price will be irresistible to shareholders, which include several heavyweight UK fund managers such as Schroder and Baillie Gifford.
Brookfield is pledging to merge Just with its own pensions' buyout operation Blumont and keep headquarters in London. At a time, however, when the Chancellor is busy shredding the City rulebooks to attract and keep listings in London, her support is an own goal. Brookfield may well be an investor in London – it is the owner of Canary Wharf – but it is effectively a private equity outfit that buys and sells assets, and uses a debt financing model.
Power booster
Several prominent UK listed companies are going through transition. Unilever, under the gaze of activist Nelson Peltz, is retreating from food to focus more on personal care and beauty. It is ironic that its best-performing business – ice cream, where sales are soaring – is heading for a listing in Amsterdam. Miner Anglo American is another company rapidly changing shape with a focus on copper. It is struggling with the disposal of 'diamonds are forever' De Beers.
Despite De Beers' grand brand it is suffering from a price drop for sparklers, partly caused by the prevalence of lab-grown diamonds. Critically, the relationship between De Beers and Botswana, which owns 15pc of the equity, is deteriorating, amid a threat to take full control of a strategic asset.
Then there is Rolls-Royce. Since 'Turbo' Tufan Erginbilgic took the controls in January 2023 the turnaround has been nothing short of astonishing. The stock (which I hold) has rocketed by more than ten times, taking its valuation past £90billion.
It has gone from near insolvency in the pandemic to being a national champion. Markets have discovered Rolls is in most of the world's fastest-growing industrial sectors. Problems with the Trent 1000 engine have been overcome. Demand for its power generation systems is surging as the AI revolution drives demand for data centres. And when next generation Small Modular Reactors come on stream Rolls has first mover advantage in the nuclear energy sector.
Erginbilgic has high hopes of becoming a bigger player in engines for jets, worth a potential $1.6trillion. But Rolls faces subsidised competition from GE and Pratt & Whitney owner RTX. As defence budgets across Europe expand, Rolls' nuclear propulsion for submarines and engines for fighter aircraft and weaponry will share in the spoils. Investor enthusiasm is no flash in the pan.
Cuckoo-land
Microsoft has joined Nvidia in the $4trillion club. Britain is clearly helping. A final report by the Competition & Markets Authority (CMA) found that Microsoft Azure and Amazon Web Services have an iron grip on the £10.5billion cloud computing sector – each with stakes of 30 to 40 per cent. The CMA wants more competitive prices, easier switching for users and innovation. Little chance of that from a Government that has embraced the tech giants despite avoidance of their fair share of UK taxes.
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