Why the chancellor may weep at Invensys takeover

 

The takeover of Invensys by France's Schneider represents the closing of an important chapter in British industrial history.

Because Invensys is the rump of two once mighty British engineers and manufacturers, BTR and Seibe, which in their heyday were international giants.

Having gone through hard times and been broken up over many years, Invensys today, with annual sales of £1.8bn, is not a small company - but it is much smaller than its rivals in industrial systems, such as Emerson and Honeywell of America, and Schneider itself.

And because it lacks the range of products and ability to offer the comprehensive engineering solutions of bigger rivals, it feels at a competitive disadvantage - which is why it is selling itself.

Is this another nail in the coffin of the UK's aspirations to make more stuff that the world actually wants to buy?

Tax tears

Start Quote

[Invensys' boss Sir Nigel] Rudd won't feel embarrassed to rush into the arms of an Emerson, for example, if it makes a higher offer before this deal is legally sewn up”

End Quote

Well today Invensys employs 1,100 typically high skilled people in the UK - and not all those jobs will be safe.

But that's only 7% of total employees, because Invensys is already much bigger pretty much everywhere else in the world than in Britain.

That said, a French company will gain control of valuable intellectual property.

And there will be a second loss to Britain. Invensys has generated massive tax losses worth hundreds of millions of pounds over years of poor performance and being reconstructed.

It has not recently been able to take full advantage of those losses because it isn't sufficiently profitable.

But thanks to the takeover of Invensys and those valuable historic losses, Schneider will be able to generate substantial profits in the UK and pay little tax on them.

So a chancellor who needs every penny of tax may weep at this deal.

Investor joy

As for Invensys's shareholders, they probably won't cry.

Over the past four years, since the arrival as chairman of Sir Nigel Rudd - the industrialist with a habit of selling the companies he chairs - they will have trebled their money, if the deal goes through.

And there is a chance they will do better: Invensys may have agreed to marry Schneider, but Rudd won't feel embarrassed to rush into the arms of an Emerson, for example, if it makes a higher offer before this deal is legally sewn up.

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +1

    Comment number 32.

    We knock Schneider but they still have significant manufacturing plant in the UK. However they do try to undercut their UK factories with similar equipment manufactured in Portugal.

  • rate this
    0

    Comment number 31.

    The company I work for had a proud heritage stretching back to the early 20th century and was a major player in a world market. And was British too. We became part of Invensys some years ago and stayed there until we were sold lock-stock at the end of last year to Siemens of Germany. All traces of the original company have now disappeared, right down to the holding company name.

  • rate this
    0

    Comment number 30.

    For all you Tories and Ed Milliband capitalism really works, especially if you happen to be the really successful chairman.
    I happen to think it is bordering on criminal and I expect the workers who get the chop will agree. All the others who have re-negotiate their contracts will have plenty of time to ponder.

  • rate this
    +1

    Comment number 29.

    "Is this another nail in the coffin of the UK's aspirations to make more stuff that the world actually wants to buy?"

    This is at the core of the problem with Britain's economy.
    65% retail 23% financial 12% (and falling) industry.
    Not making stuff any more will eventually see this country diminish to 3rd world status & meanwhile the likes of Rudd are happy to let it happen for short term profit.

  • rate this
    0

    Comment number 28.

    I don't see how we can blame government for the sale of a private company. One poster mentions fracking as our saviour. I'd like to see some analysis and consideration based on evidence of ROI as these wells deplete very quickly even in large resource bases like the US. I'd also like to be convinced that the 15% of liquid used for fracking that is not recovered does not pollute our water supply.

 

Comments 5 of 32

 

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