Labour, bankers and British manufacturing: update

Jack Dromey MP with members of the UNITE union objecting to the Kraft takeover

Reuters reports today on the Mandelson appointment to Lazard bank…”the bank that masterminded Kraft Foods’ 11.6 billion pound ($18.4 billion) takeover of Cadbury a year ago.”

“Mandelson, secretary of state for business under the UK’s previous Labour government, joins a network of advisers that includes Archie Norman, the chairman of broadcaster ITV ITV.BK, and Paul Keating, former prime minister of Australia.”

Readers might remember that this Lazard-driven takeover damaged not just Cadbury’s but also Kraft’s  – which suffered reputational damage when it reversed it’s promise not to close the Somerdale factory near Bristol. But above all, Lazard’s deal burdened Kraft’s management with £7bn ($11.5bn) of debt to finance the deal.  Bankers, including Lazards, will do well if these debts are paid. Savings to finance the debt will be found by cutting back on British manufacturing capacity, on British jobs, research, investment and other costs at the company.

In his evidence to the Select Committee on Business, Innovation and Skills, in March, 2010,  Lord Mandelson said about the takeover of Cadbury:

” it is hard to ignore the fact that the fate of a company with a long history and many tens of thousands of employees was decided by people who had not owned the company a few weeks earlier, and probably had no intention of owning it a few weeks later.”

These people were mobilised behind the takeover by Lazards. We should not deduce from the above comment, that Peter Mandelson thinks that it is a bad thing for successful companies ‘with a long history’ to be subject to the careless approach of people who have no long-term interest in the company, or in the UK economy.

In his evidence Mandelson remained unconvinced that providing Government with the power to intervene in the public interest was either necessary or desirable. He feared that (wait for this): “in those circumstances a government’s judgment and intervention could be too exposed to political lobbying”

– ‘political lobbying’?  You mean the kind of lobbying that Lazard’s has hired Lord Mandelson to undertake? Or are we being a wee bit unfair here?  For all we know, he’s been hired to fill a vacancy in Lazard’s Algorithmic Trading Quant office.

Mandelson went on to argue that governmnents should not have a ‘public interest’ power to intervene in takeovers of British companies, because politicians would be subject to “short-term populist pressures which are unable to make an assessment of long-term growth and value that might come from the move.”

Do we think he meant the kind of long-term growth and value assessments made by people who had not owned the company a few weeks earlier, and probably had no intention of owning the company a few weeks later?

Lord Mandelson feared that such a public interest approach  “might give rise to capricious decision-making of one sort or another, depending on the ministers and their official advisers, and it can lead to a loss of transparency and a loss of predictability which at the moment makes the current UK regime open to investors from which, I just underline, we benefit a great deal. ”

So that’s clear then: the interests of foreign investors must take priority over the judgement of elected British politicians; over Britain’s public interest, and over hard-working, job-creating  British manufacturers.

No wonder Lazard wanted to hire him.

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