Embrace globalisation, business told

By Jorn Madslien
Business reporter, BBC News, CBI Conference

Globalisation in its broadest sense is crucial to ensure continuing prosperity, CBI members have been told.

Mr Brown warned against "the threat of protectionism"

However, many of them fear that, since the Anglo-Saxon approach to openness is not matched by other countries, British business could lose out in the end.

"Free trade, open markets and flexibility are preconditions of modern economic success across our global economy," Chancellor of the Exchequer Gordon Brown said.

"Nations that are open to trade have vastly stronger economies than countries that close themselves off," agreed US Treasury Secretary Henry Paulson.

British business is certainly a proponent of free trade, but there are concerns that globalisation could damage rather than bring gains for the UK economy.

National champions

This is particularly the case when the shoe is on the other foot and UK companies "fall into the hands" of non-British conquerors.

Economic migration has many detractors, but clearly what we are seeing here is unquestionably positive and beneficial to the UK Albert Ellis, chief executive, Harvey Nash

"There is understandable concern about the wave of foreign takeovers of British businesses," said CBI director general Richard Lambert.

When CBI members were asked for their view during the conference, 70% of the respondents said company ownership mattered, while 84% said they believed in national champions or strategic assets crucial for the nation's well-being.

Adding to their voices was one from France, where the government has traditionally been eager to nurture such national giants.

The London Stock Exchange, currently being pursued by the Nasdaq exchange in the US, is a case in point, according to Jean Louis Beffa, chairman and chief executive of Saint-Gobain, the building materials conglomerate.

Such a takeover would put London's main advantage - which is its reputation as one of light-touch regulation - at risk, he said.

"In the long-term, you'd be run the American way with more influence by the Securities and Exchanges Commission," he said.

Moreover, in line with recent complaints from the CBI that it is easier for foreign firms to buy UK companies than the other way around, 90% of the respondents complained of a lack of a level playing field for cross-border mergers and acquisitions.

Stakeholder company

Several big names have targeted the London Stock Exchange

The laissez faire, Anglo-Saxon approach to business, which Mr Brown and Mr Paulson promote as essential to further free-up markets, also came under fire.

According to Mr Beffa, "there are different types of capitalism", hence countries have their own form of capitalism, which tend to benefit their national economies.

France is one of many countries that has come under fire for protecting its "national champions" from takeovers by foreign firms, while simultaneously encouraging these same companies to go on acquisition-sprees abroad.

Mr Beffa said he believed the French system was efficient in promoting long-term investment, and in protecting national champions from the short-term whims of the stock markets.

"We can describe ourselves as a stakeholder company, not just a shareholder company," he said, hitting out at efforts to "force your solutions onto France's... very nationally oriented system".

"There is not a 'modern system', as I hear from the Chancellor, and a 'backward, stupid' system," Mr Beffa said.

Beneficial migrants

Mr Brown warned against "the threat of protectionism" and insisted that overall the UK stood to gain from globalisation, "not just because we are among the most stable economies in the world but because we are the most open economy".

Moreover, Britain's "openness extends to embracing new ideas, and new influences".

A stark example of how such openness can help fuel economic growth was provided by a survey published at the CBI conference, which found that skilled migrant workers accounted for 5% of the UK's gross domestic product (GDP).

"The UK is now so heavily dependent on its migrants, that dispensing with them would cost the UK the equivalent of 100 new hospitals and more than 500 new schools, or approximately £54bn," the Harvey Nash/Centre for Economic and Business Research survey said.

"Economic migration has many detractors, but clearly what we are seeing here is unquestionably positive and beneficial to the UK," said Albert Ellis, chief executive, Harvey Nash.

Mr Lambert added: "We will have to keep reminding ourselves of the enormous benefits which foreign capital and foreign talent have brought to the UK in recent decades, while making sure that foreign ownership does not threaten... the competitive position."