The Guardian view on the ARM sale: foreign takeover not inward investment
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Version 0 of 1. Only a week after Theresa May promised an industrial strategy that was capable of stepping in to defend a nationally important sector, ARM, one of Britain’s most successful technology companies, is being sold to the Japanese tech group SoftBank in a £24.3bn deal. Inward investment, say Prime Minister May and her new chancellor, Philip Hammond, both consulted ahead of the announcement. Foreign takeover, suggests the Labour donor John Mills elsewhere on these pages. The official enthusiasm might owe more to relief that foreign companies still want to invest in the UK, despite Brexit – which, by causing sterling to depreciate sharply, made it such an attractive deal – than it does to a realistic appraisal of what it means to a sector that is the engine of the next industrial revolution. ARM is a company of 4,000 people that has quietly and very profitably manufactured nothing at all for the last 26 years. Instead it has designed processors for others to build and around 80% of the world’s inhabitants now own something with an ARM-designed chip inside it. Most often these are in phones, but also in televisions, cars, printers – anything that needs reliable low-energy computing power, as almost everything built in the world now does. The purchase of ARM is a bet by SoftBank that computing power and connectivity will be embedded into almost every physical object in the world, from cars to wristwatches, from air conditioning to light switches, until it becomes as invisible, as ubiquitous and as indispensable as electricity. This “internet of things” will not necessarily be recognised; just as a modern car is a network of 50 or more computer systems all talking to each other and some to the outside world as well, even when it appears to be entirely controlled by the driver, the house of the future will increasingly consist of low-power networks working invisibly and often to our benefit. Manufacturing will be even more radically transformed by networked production and by interdisciplinary research that develops new ideas, such as networks that allow roads and cars to communicate with one another. SoftBank, a company whose acquisitive founder and chief executive, Masayoshi Son, boasts of always looking for his next big idea, is betting that all this will happen with the help of ARM chips. For its part, ARM is looking to expand its technology and graphics capacity. It is a company with a steady income stream and no borrowing, whose capital consists almost entirely of its small, very highly-qualified workforce. Critics of the idea of an industrial strategy argue that no government has ever been good at picking winners; markets should shape investment decisions, not politicians and civil servants. Mrs May’s Birmingham commitment to an industrial strategy was notable not only because it broke with recent tradition, nor because within hours she had become the prime minister elect, but because she placed the lack of an industrial strategy squarely at the heart of the wider problems of low pay and low productivity. She held out the promise of an economy that worked for everyone. Technological excellence and innovation are not enough; but if leading companies, like ARM, that are most likely to drive such a transformation are sold abroad, their tax revenues and ultimately their management put in the hands of individuals with less stake in the country, their strategic value is at least compromised. Two new studies underline the scale of the challenge to the inequality that Mrs May has pledged to address. The Institute for Fiscal Studies’ latest annual survey of pay and poverty shows median incomes finally above the level at the time of the 2007-08 crash. But that is only because the over-60s are better off and there are more and more of them. Incomes of people between 30 and 60 are just back at pre-crash levels, and those of under-30s are still a monstrous 7% below. At the same time, research by the Resolution Foundation, which is setting up a commission to examine intergenerational unfairness, suggests this Generation Y may actually earn less over their lifetime than their parents. Too much work no longer pays. It is not companies like ARM that will in themselves drive up the country’s pay and productivity. But exploiting what they and companies like them do by integrating them in the development of an industrial strategy as the German Industrie 4.0 does, and actively seeking to make Britain a leader in innovation, must be at the heart of any 21st-century industrial policy. |