BRITAIN should introduce US-style anti-takeover legislation to help combat the continued decline of manufacturing, a new paper published by the cross-party think tank Civitas argues.
In the paper, John Hann, who spent 35 years as the director of a number of small engineering firms, said public companies have become less willing to build up assets and reserves because it makes them a target for takeovers and asset-stripping. This has encouraged a culture of short-termism, according to Mr Hann.
“Britain needs to introduce an anti-takeover law to bring Britain at least into line with the USA,” Mr Hann said, in the latest of the Ideas for Economic Growth series.
“In most of the world, hostile takeovers are rare or almost unknown.
“Britain is alone in its belief in the benefit of hostile takeovers, a belief which is not supported by the evidence of its large current account and budget deficits... Britain is, in effect, suggesting that it is right and the rest of the world is wrong.”
By contrast, US firms are protected by anti-takeover statutes, the Civitas paper said.
“The constant threat of hostile takeovers compels public companies to take short-term measures in order to satisfy their shareholders,” the report said.
In his paper, Mr Hann argues that tackling hostile takeovers must be part of the response to rising inequality in British society.
“Wealth is not ‘trickling down’ from the wealthy financial sector in London to the rest of society,’’ he said.
“The problem of rising inequality in Britain, exemplified by the protests and the occupy movement, has not gone away.
“It has merely been postponed by allowing Britain to live beyond its means.”