Hanover

20 Jul 2016

Theresa May – and many influential thinkers on the centre right and right of the Conservative party – were gunning for big business long before this now, mercifully completed, leadership contest.

Prime Minister in-waiting has set out a new industrial strategy that will force companies to re-think their approach to mergers and acquisitions, prepare for extra powers for the Competition and Markets Authority (CMA) and re-examine their own corporate tax planning and executive pay. Mrs May also doubled down on “Brexit means Brexit” although the timing of this will be tempered to allow for diplomatic discussions to occur before Article 50 is triggered.

The speech was – according to a close aide – ‘all her own thinking’ but felt like a combination of blue collar Conservativism and almost Obama-like anti-corporate rhetoric that proved a potent message for the Brexiteers during the referendum campaign. It was also an ‘early’ set of campaign policies that she could shelve if necessary.

Her suggestion that the government should ‘be capable of stepping in’ in the event of another US bid for UK pharmaceutical industry jewels such as AstraZeneca hinted at expansion of the public interest test which currently only applies to takeovers affecting national security and media plurality. Her description of Pfizer as ‘transient shareholders…with a track record of asset stripping’ will limit the tax inversion strategies of US corporates.

If carried through into law, it also marks a change in the open markets approach of George Osborne and Business Secretary Sajid Javid, who was an avowed free marketer until faced with the realities of the Tata Steel crisis which turned Wales ‘Brexit’ overnight because of the failure of the Commission to stop Chinese dumping.

Osborne and his team pushed the boundaries of their negotiating scope in squeezing more corporate tax out of Amazon, Starbucks and Google but got no voter thanks for it. In part, Osborne’s hand was stayed by the need to devolve some policy decisions to the EU in negotiating intra-national corporate tax strategies. After Brexit, the UK will arguably have more freedom to set its own tax regime while still having to work with the G20 process.

The introduction of legislation to make shareholder votes against remuneration packages binding was likely to happen whatever the outcome of the referendum. The compulsory introduction of consumer and worker representatives onto Boards – German style – may fall foul of the free-market tendency on the Conservative benches.

As someone who had to secure the support of the Labour party to get her Investigatory Powers Bill through the House of Commons, Mrs May will already be aware that much of this agenda could only be achieved with Labour’s backing – albeit at a price since the left will always want to go further on corporate governance issues.

It is hard to see how her anger about high energy bills will be translated into policy given the completion of a recent CMA inquiry, itself provoked by the previous Labour leader Ed Miliband who sought to tap into changing attitudes towards ‘greedy’ corporates. The most likely casualty of this rhetoric may well be renewable subsidies which are forcing up consumer bills.

Her desire to introduce greater competition in banking may also bump into the requirement to get the valuation of RBS back up to £45.5bn as its share price is languishing post Brexit at 169p.

Understandably, Mrs May made only a passing reference to unskilled immigration. She has been advised by No 10 officials that the best she might secure from Germany would be a return to the pre-1989 regime when EU migrants required work permits before coming to the UK. That would only reduce EU migration by 68,000 and could not be achieved until after the French Presidential election next April and May.

If half this policy agenda is introduced, the winners will be UK businesses that pay good chunks of corporation tax, don’t overpay the boss (BP beware) and continue to act responsibly in the communities in which they operate. The losers will be global corporates who feel that they can only increase shareholder value by buying UK assets and their advisors such as the investment banks who were not name-checked in Mrs May’s Birmingham speech but might easily have been.