What the blocked Telegraph bid says about Britain
The government's capitulation to a protectionist campaign by the right-wing media and Tory MPs sends a very negative message to international investors
I much enjoyed talking yesterday to Alan Rusbridger and Lionel Barber, the former editors of the Guardian and Financial Times respectively, about the Abu Dhabi-backed bid for the Telegraph newspapers and Spectator magazine for their Media Confidential podcast. The interview was recorded before the news broke that the government would introduce legislation that would effectively kill the deal but when the fate of the bid was already looked clear.
Much of the discussion focused on the points I made in a previous post for Wealth of Nations about the misrepresentation of the deal in much of the media reporting and wider political debate. But we also looked ahead to what the consequences might be if the government did bow to pressure to block the bid. I think this debacle raises troubling questions and will only inflict further damage to Britain’s reputation among international investors. Do listen.
I don’t think anyone can be surprised that Rishi Sunak has acted as he did. By the end, the coalition of powerful vested interests ranges against the deal, including all of the right-wing media and much of the Conservative party, had become too much to resist for a weak government led by a prime minister whose authority is visibly crumbling. The final nail in the coffin of RedBird’s bid was when the Labour Party signalled their backing for an amendment to the Digital Markets Act that would have given parliament a veto over any bid for a British media asset by a foreign government. The government’s new amendment would, according to The Times (£),
Grant powers for the government to issue a Foreign State Intervention Notice to call in takeovers of newspapers or periodical news magazines by overseas powers… The new media merger regime would block both a foreign state “or a body connected to a foreign state”… The new legislation would expand on the definition of foreign powers in the National Security Act to include “officers of foreign governments acting in a private capacity and investing their private wealth”.
The fact that ministers have had to resort to such wide-ranging new legislation would seem to confirm what I had previously written: that there was in fact no threat to press freedom from the RedBird bid. The government already possesses wide-ranging powers to block media mergers on public interest grounds. Indeed, Lucy Frazer, the Culture Secretary had already referred the bid for reviews by Ofcom and the Competition Authority, whose reports she had received only this week. Had they identified any grounds to fear that a foreign government might be in a position to exert editorial control over a British media asset, the government would surely have seized on this to block the deal - and indeed, would have been right to do so. By reaching for the nuclear option of legislation, the government is implicitly conceding that it didn’t have a regulatory leg to stand on.
That should come as no surprise. After all, this was never a conventional corporate takeover in which the investment by IMI, the fund run by Abu Dhabi’s Shaikh Mansour’s, would take the form of ordinary voting shares that would confer some degree of control over the businesses. This was a private equity deal under English Partnership Law in which RedBird was to be the general partner and IMI would be among the limited partners. As the government’s own factsheet spells out, these terms have a very precise meaning in law. “Limited partners do not have any control over business decisions or the operations of the business”. Indeed, the deal was restructured to replace RedBird IMI, a joint venture between RedBird and IMI, as general partner with RedBird alone to remove any misunderstanding of the role that the Abu Dhabi fund would play, a vital detail that the British media failed to report.
But it would be naive to imagine that scuppering a high profile investment by a well regarded US private equity firm and a fund based in a friendly Middle Eastern state will not have wider consequences. A front page piece in the Financial Times this week noted that stock markets around the world are soaring as investors undergo a “risk reset”. But there is one country that is missing out on this investor euphoria. Both the FTSE 100 and the more domestically focused FTSE 250 indices are effectively flat this year and have comprehensively underperformed every other major market over the last five years. British stocks are valued at a gaping discount to their international peers. As a barometer of international investor sentiment towards Britain, the stock market is signalling that the country has a serious problem. And by capitulating so meekly to a protectionist campaign, the government has just made it worse.
Indeed that damage will only be deepened by the decision by Labour to back the move. In many ways it is understandable from a purely political perspective. If the government cannot be bothered to defend open markets and explain the details of English partnership law, then why should Labour expend political capital, particularly this close to an election? To do so would simply be to expose itself to the ferocity of the right wing press which would accuse it of cozying up to autocrats.
Nonetheless in taking the path of least resistance, Labour under Sir Keir Starmer continues a worrying trend. To his credit, he has so far refused to bend the knee to Rupert Murdoch the way they Tony Blair did before the 1997 election, though the truth is that there is probably no deal that Starmer could strike with News Corp having tried to put so many of its journalists in prison when he was director of public prosecutions. But the corollary is an extreme reluctance to do or say anything that might expose Labour to attack by the right wing press.
That is unfortunate. If Labour is to have any chance of pulling the country out of the deep morass into which 14 years of Tory economic misrule have plunged it, it will need to make Britain once again attractive to global capital. Instead, by going along with narrow Tory economic nationalism, he will have raised fresh doubts about the country’s long term trajectory. The nixing of the RedBird bid is undoubtedly a bad day for the Telegraph titles, which have lost their best chance of very significant new investment, and bad news for the British media. But it is also bad news for Britain too.
Very astute analysis. I’m concerned about all the private non-dom individuals owning our press too. But I doubt the government will do anything about them.
This tawdry business smacks of the right wing of the Tory Party protecting its in house news sheets (DT and Spectator) above all else. So much for the free market.
Excellent piece. With any luck some sort of News Corps/DMGT combo will ensure that the sinister Paul Marshall does not get his hands on either the Tel or Spec, though they may fall foul of monopoly concerns too. Like you I can't see what is wrong with the Red Bird/UAE bid. On the contrary, looking at those opposed to it, I instinctively think it might be a good idea. The Telegraph has gone full tonto crazy, judging from today's Jacobin Heath piece, in which he basically advocates the Tories using Farage to mobilise working and middle class fascists. I assume this is part of a wider problem, namely the recruitment of second rate Mail executives to edit every damn newspaper.