Our economy is one of the most open on the planet. Not only do we not worry about who owns what company, but we are now so well adapted to the open-market way of life that we actually believe that many of the foreign-owned companies operating here are, in fact, British.
Classic examples include Ford and Vauxhall, which have both been US-owned certainly for as long as I can remember. But nowadays, the list of – let’s call them pseudo-UK companies – in the automotive sector also includes the Mini company, Rolls-Royce and Bentley.
Clever public relations and smart advertising have, however, maintained an image that nothing has actually changed. They provide the fog from behind which it’s difficult to see that some, if not sometimes all, of the profits these companies make are remitted overseas; that the corporation tax some of them pay is a lot less than if they were wholly owned here, and that a lot of the R&D and value-added engineering and product development is now done overseas.
Closer to home, within the energy sector, there are, of course, plenty of similar examples.
It always amuses me that the “UK subsea technology sector” is referred to as being the absolute world leader. Sadly, though, if half-a-dozen of the most strategically important companies that go to make up that sector decided to close their offices in Scotland and move back to their home countries, the UK-based subsea technology sector would be severely hit.
Of course, I doubt that is likely to happen for a long time, unless the UK Government completely screws up the tax regime – which, given its track record, is always a possibility.
However, it’s worth reminding ourselves from time to time that a very large part of the employment in the energy sector – oil&gas and renewables – is dependent on foreign-owned companies.
That said, it is also worth reminding ourselves that what really makes the UK subsea technology sector so damned good is the people, most of whom are “local” and of whom we should be very proud.
Fortunately, all these companies have their origins in friendly countries with similar values to our own – except, of course, when it comes to industrial aspiration.
But we all generally believe in open, multi-party democracies, free speech and the right to vote for whom we want to. Our press and media, although sometimes very biased, is broadly free to say what it wants – though not as much as you might think.
The same cannot be said, of course, about the People’s Republic of China, which is a country that is having an increasingly large, and potentially very dangerous, influence on the energy sector.
It must be remembered that the “credit crunch” was due, in large part, to the massive trade deficit that was built up on the back of cheap imports of goods from China. This led to an unsustainable credit bubble, leading to the highest level of household debt in our history. Via the banks that provided the credit, we also transferred a large part of our wealth from the West into China.
The Chinese are now using a lot of that wealth to buy up, or buy into, a range of assets, including oil&gas, coal-bed methane and others. They need it because China’s energy consumption is rocketing. For example, its demand for oil jumped by a mind-boggling 28% in January, compared with the same month in 2009.
China is trying to secure energy resources to power its fast-growing economy and, while it may seem a little bizarre that a free-market, quoted company such as Shell should be working with a state-owned outfit like PetroChina to acquire Arrow Energy, it’s undoubtedly because Shell wants improved access to the Chinese energy market. But why? Because Chinese demand is growing like Topsy, whereas just about everywhere else, the markets are shrinking as the impact of taxes, improved energy-efficiency efforts and other policies and initiatives begin to kick in.
But surely we need to be very careful about how we proceed in our energy relationship with China. Let’s remember that China is a one-party communist state that simply doesn’t have the same values as we do in terms of democratic rights, freedom of speech, and so on and so forth.
From a trading standpoint, there is no doubt that the Chinese currency is grossly undervalued, and this provides the Chinese with an unfair advantage when it comes to exporting goods. But the Chinese steadfastly refuse to consider revaluing their currency, accusing the West, and particularly the US, of attempting to set up a form of currency protectionism by making Chinese goods more expensive to buy.
Google – the internet search-engine company – has finally seen the light. It has now closed down its search-engine business in China because it has refused to censor searches as it was instructed to by the Chinese government. This is a brave move and will, hopefully, encourage the Chinese people to push harder for the great Chinese firewall to be torn down.
But perhaps we need to take the same sort of approach. There isn’t a lot you can do to change the attitude of a nation such as China if you continue to do business with it and, in particular, if you sell its goods and take its investment.
There are two cases close to home that bring me out in a cold sweat. Firstly, it was reported in the media recently that Ineos, which bought the Grangemouth refinery from BP in 2005, is in talks to sell at least part, or possibly all, of the plant to PetroChina.
Do we really want a Chinese communist state-owned company running Scotland’s main refinery? Personally, I think not. I just don’t believe it’s to our benefit.
Secondly, it was also reported recently that one of Scotland’s leading motor dealers is planning to sell Chinese-built electric vehicles for about £5,000, which is considerably less than the price of current electric vehicles.
If that happened, it would effectively undermine any possible efforts by a Scottish company to develop and sell electric cars, and would certainly upset Peter Mandleson after he had poured all that money into Nissan. I think we need to do a Google.
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