This Pfizer takeover would be a real threat to British sovereignty
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Version 0 of 1. Last week came a threat to British sovereignty much more serious than the interventions from Brussels aimed at deepening the European single market. American drugs giant Pfizer launched a £60bn bid for Britain's second biggest pharmaceutical company, AstraZeneca. This has huge implications for British research and development, the structure of exports, public health, Britain's position as a global leader in drugs production and even our tax sovereignty. But from the Eurosceptic right and Ukip there has not been a squeak of protest. The only threat to sovereignty they can imagine is from the EU. Ownership matters. It confers the right to decide. In Pfizer's open letter to David Cameron, the company says it will deign to complete the planned £350m research complex in Cambridge, and intends to base its European operations, along with 20% of its worldwide research, in the UK for five years. These will be its sovereign decisions. After that, Pfizer offers no promises, despite the government boasting of the concessions it has won. Why should it? It will own a once great British company and can do what it will. The evidence is that mergers can be relied on to do two things: prolong the career temporarily of the aggressor CEO, boosting his remuneration, while destroying value for the combined group as a whole. This takeover, driven by tax considerations rather than business logic, shows every sign of destroying AstraZeneca, a company that contributes more than 2% of Britain's manufactured exports, employs 7,000 people directly, another 23,000 indirectly and creates nearly £4bn of added value for the British economy. AstraZeneca is a crucial pillar of Britain's aim to be a major force in life sciences over the next generation, with major beneficial implications not only for employment and science, but also for public health. For Pfizer is openly buying AstraZeneca for tax planning. It has built a huge cash war chest that it holds outside the US because it does not want to pay corporation tax at 35%. Instead, by buying AstraZeneca, it can enjoy both Britain's 21% corporation tax and further tax reliefs designed for drug companies – the so-called patent box. George Osborne is compelled to welcome Pfizer's bid as proof positive of his "enterprise-friendly" policies and validating his corporation tax reductions. It is no such thing. If the bid succeeds, the coalition government will have thrown its collective weight behind this sale of a major British asset and future UK governments' freedom to change corporation tax will be eliminated. To increase it will be to risk Pfizer moving its European headquarters to another European country offering lower corporation tax rates. We have entered a futile race to the bottom in which the only winners are footloose multinational corporations. The doctrine is that all these considerations should be left to AstraZeneca's shareholders to decide the company's future on "commercial" grounds. But like all British plcs, AstraZeneca is an ownerless corporation. The hedge funds and global asset management groups that own more than half its shares have zero interest in British employment, public health, science base and exports – and little in the strategic development of the business. Their only interest is in securing their bonuses. They will sell to Pfizer at the highest price they can get. Other countries allow their companies, through differing combinations of corporate governance, company law, financing systems and patterns of ownership, the scope to invest, innovate and grow free from predators like Pfizer. In extremis, their governments step in and protect key businesses. AstraZeneca is not like Jaguar Land Rover, on its knees and needing foreign takeover. It is a good business that has done all the right things. Its reward as soon as a foreign predator arrived was for the government to prejudge the result by opening negotiations. Drug companies know the goodwill of governments is crucial to their business: it is governments that set drug prices, tax policy, and invest in research. The UK government did not have to roll over. It could have been patriotic. Had it said it was opposed to the bid, Pfizer would have withdrawn – but that takes political bravery. At the very least, it could have asked Pfizer for a $10 billion bond which the company forfeits if it does not keep its pledges. |