ALEX BRUMMER: Russia’s invasion of Ukraine highlights the madness of selling off Britain’s high-tech defence firms
Russia’s war on Ukraine underlines the need for resolve in maintaining Britain’s technological edge in national security.
The Commons foreign affairs committee deserves credit for drawing attention to the Government’s tardiness in scrutinising the proposed purchase of the semiconductor maker Newport Wafer Fab by Chinese-controlled Nexperia.
It questions why a UK firm, which is part of critical security infrastructure, should be allowed to fall into the hands of China. It might have added at a time when Beijing has refused to distance itself from the inhuman assault by Russia on Ukrainian citizens.
Security fears: Chinese-owned Nexperia acquired the Newport Wafer Fab semiconductor maker in July 2021 for £63m, but the deal is now being investigated
There is a broader issue at stake. The National Security and Investments Act was meant to ensure that the UK’s exceptional defence technologies stay where they belong.
It is hard to imagine that a wartime Churchill government would have allowed vital UK tech, such as radar and Enigma, to fall into uncertain ownership.
But that is precisely what is now happening. Instead of blocking a series of defence takeovers, Business Secretary Kwasi Kwarteng and the Government appear prepared to allow critical defence technology to be transferred into unsafe hands.
The sonar detectors developed by Ultra Electronics enable Nato to track the movement of Russian submarines.
It is critical work at a time when Moscow’s expansionism threatens Baltic countries and Russian subs are on unwanted missions in UK waters.
Yet the Government is conducting negotiations with would-be buyer Cobham, a private equity firm in the disguise, of a great British defence name, which would see command and control sacrificed. The idea that pledges about staffing, R&D and UK headquarters can keep Ultra tech out of harms’ way is fantasy.
A range of UK defence technology stocks currently are in jeopardy. There is increased confidence that US rival Parker-Hannifin will land control of Meggitt which has been part of Britain’s aerospace supply chain since the 19th century.
Satellite pioneer Inmarsat is in sight of being swallowed by American competitor Viasat. Melrose has made no secret of its desire to dispose of GKN’s aerospace arm when time is right.
What is certain at present is that whatever the outcome of the security reviews, and other negotiations taking place, anything which diminishes the UK’s defence sector in wartime conditions would be negligent.
The UK needs all the levers it can muster in challenging the Chinese and Russian menace.
With defence spending ratcheting up all over Europe and the Middle East (because of the Iran threat), not only do UK national security firms provide Britain with a home-grown shield against aggressive enemies but offer a stirring manufacturing and export opportunity.
Boris Johnson must cancel or suspend any such transactions until the current war in Ukraine has been ended and Iran’s aggression across the Gulf curtailed.
There is an inherent conflict in Elon Musk’s purchase of a 9.2 per cent stake in Twitter for £2.2billion.
His stake-building bears similarity to Remington entrepreneur Victor Kiam. He liked the shave so much he bought the company.
Musk, an addicted tweeter, is irritated by limits Twitter places on free speech. And in the recent past he has been punished by America’s Securities and Exchange Commission for using Twitter as a test bed for Tesla corporate actions.
Grabbing a dominant stake in a core media outlet does not spell greater independence. It focuses attention on the immense market power of the 21st-century tech giants.
For the moment Musk’s manoeuvre is seen by investors as a blessing by reinvigorating share prices in a sector punished this year.
If Musk were to go the whole hog and buy all of Twitter – a mere bagatelle given his immense wealth – it could prove a move too far. It would spur US anti-trust authorities into decisive action against tech power.
Nickel and dime
The London Metal Exchange and its settlement arm LME Clear were not known for good governance and safety long before it fell into the hands of the Hong Kong Stock Exchange.
The nickel crisis and the threat it poses to financial stability have placed procedures firmly in the spotlight.
Whether the LME would have proved more durable if it hadn’t fallen into overseas hands is hard to say.
That there is a governance and skills deficit is evident. Is that the sound of the FCA and Bank of England slamming the stable door again?