GKN takeover has thrown up debate on capitalism
The controversial takeover of GKN has led to soul-searching about the extent to which the state should intervene in the UK’s interests.
Who would have thought Telford’s Tory MP Lucy Allan and Labour’s Jeremy Corbyn would agree on an issue that would normally divide them – capitalism?
Enter the highly controversial takeover of GKN by rival British firm Melrose, which has made no secret of the fact it intends to make it more profitable through efficiencies before selling it on.
The future of GKN matters because of what it makes. Telford’s 400-strong workforce is part of its wheels and structures arm. But the company’s total workforce of almost 60,000 is also involved in other areas of engineering and that includes aerospace, both civil and military.
Its aerospace division is a major supplier to the US military and a key partner on defence programmes such as the F-35 joint strike aircraft in which the UK government has a stake. It makes ice protection systems, protective films and canopies for the Eurofighter Typhoon, which it develops with BAE Systems. GKN’s technology is also used on the Lockheed Martin F-22 Raptor stealth tactical fighter, and the AgustaWestland AW101 military helicopter.
That range of work means British security and defence is very much tied up with the welfare of GKN. And that brings into question whether it should be open to the vulnerabilities that come with a company whose future is at the behest of its shareholders.
The issue has thrown up a debate about capitalism and what that word means when it comes to governing an economy in 2018.
Labour has called Melrose a “short-termist asset-stripper” and condemned the deal for one of Britain’s oldest engineering firms.
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Jeremy Corbyn said: “The Tories have put the interests of City speculators over people’s jobs. Labour would have stopped the takeover of GKN and, in government, we’ll make our economy work for the many, not the few.”
It is the kind of response one would expect from Labour’s left wing leader. But look at the parallels with the comments made by Conservative Lucy Allan, responding to the news that Melrose had succeeded in its hostile £8.1 billion takeover.
Ms Allan is a former accountant with Price Waterhouse and specialised in the manufacturing sector, with GKN as a client.
She said: “We are seeing the future of a great British manufacturing company being decided by short term value investors. These investors, or vulture funds, came on to the GKN share register for a matter of weeks in order to make a quick and significant profit. And it is they who have decided the future of this great British company.
Intervention
“Capitalism has moved on since the 1980s. Today we care about those with a long-term interest in our manufacturing sector. Today the interests of employees, pensioners, customers, communities, suppliers and innovators come first – and well before the interests of hedge funds making a quick buck. No-one disagrees.”
Business Secretary Greg Clark did appear to disagree. He initially seemed to rule out any intervention, saying the Government did not agree with protectionism. The Conservatives are, after all, the party of free enterprise.
But Mr Clark has been under significant pressure, not only from those you would expect to raise concerns like unions, but also from senior members of his own party.
Former defence secretary Michael Heseltine said any other country apart from Britain would block the takeover on national security grounds. And the man currently in the defence post, South Staffordshire MP Gavin Williamson, is also understood to have ‘serious concerns’.
That pressure from within the Tory ranks appears to have had an impact. Mr Clark has softened his views, saying he would now not give a view until he had considered all the evidence.
History
The minister is aware there is much public affection for a company with a history going back more than 200 years. It has had a hand in making everything from Minis to Spitfires but also produced cannonballs for the Battle of Waterloo.
Addressing concerns that the takeover had been waved through by speculators, Mr Clark said: “Those shareholders that bought their shares very recently of course bought them from other shareholders who chose not in effect to back the continuing management.”
He said ministers would instead seek to “ensure that our business environment is one in which there is competition, in which no incumbent is immune from the challenge of being kept efficient and strategically focused”.
The possible implications to British security arising from the sale of GKN are clearly profound. The ongoing battle over whether it is right for Melrose to take over the company before selling it on down the line also has a wider impact in that it calls into question the whole nature of capitalism and where and when the state should intervene.
About 400 workers in Telford and another 1,000 in the wider Midlands will be hoping the ultimate outcome works out the best for them.
