Wilf Stevenson on the questions raised by Pfizer’s bid for AstraZeneca
Labour is a party of business. We believe in free trade and open markets. We also celebrate the extraordinary success of the UK over decades in attracting foreign direct investment and R&D. There is no doubt that the largest global companies see the UK both as a centre of excellence and a gateway to European markets.
We have heard a lot from the Coalition over the past few years about the need to rebalance the economy, and the recent BIS Industrial Strategy suggests that pharmaceuticals and life sciences more generally is one sector that could make the greatest contribution “to future growth and employment in the UK”. Given that we must increasingly ensure clusters of industrial activity across the UK – not just in London or the South – the proposed takeover by Pfizer of AstraZeneca is one we need to consider very carefully. This is a company that alone contributes 3% of our exports, and provides over 7,000 jobs directly, around our country. So any takeover could have a big impact on employment in Macclesfield, Luton and Bristol as well as London. Plus many more SMEs are part of the supply chain.
In a recent article, Mervyn Davies, a former Bank Chairman and Trade Minister, said that one thing we should learn from the recent financial crisis is that the increase in hedge fund participation means shareholders are now too short term and focused primarily on quarterly performance and benchmarking. He went on to say: “the Cabinet is in many ways the board of directors for the country - UK plc. So they must ensure we are not too short term, that we are competitive and yet that we are not so open that our competitors steal our business.”
You do not have to be an expert on the pharmaceutical industry to wonder whether Pfizer see this deal as more about financial engineering rather than industrial logic. Have we learned nothing from the Kraft Cadbury Schweppes deal? Many people will recall that during the takeover process, Kraft made promises that they did not fulfil. They have been rebuked, but that doesn’t do much for those who lost their jobs, or for communities which lost their investment. It has been reported that senior civil servants have been talking to Pfizer. But shouldn't their first port of call have been to speak to AstraZeneca, to find out what could be done to support a UK-based company that we want to do even better in future?
The UK has a very diverse economy; and whether it is the creative industry, insurance, professional services, aerospace, automotives, biotechnology, education, or consumer products, we have leaders and global positioning. We are a nation with huge ability to create but we must ensure that we do not lose our top companies or their staff, and that we develop and maintain our leading position on research. On mergers, the Business Secretary already has powers to intervene on grounds of national security, media plurality, financial stability and competition to block takeovers. But there ought to be another category – the impact that a potential takeover has on R&D and our science base; with a system of advice to ensure that government can determine whether the takeover would be positive or not.
Labour doesn’t want government to overly intrude in business, but we need to reflect on whether certain industries, research capability, companies and clusters are of such national importance that the country should have a view. The trick will be to have a system which both protects our key industrial assets and yet keeps us open to innovation. That is the nature of the dilemma. Leaving it just to the shareholders and boards may not be enough.
Lord Wilf Stevenson of Balmacara is a Shadow BIS Minister in the House of Lords, and tweets at @Missenden50
Published 6th May 2014