Darling: UK PLC is open for business

July 26, 2007 - 0:0

The new chancellor Alistair Darling made Wednesday a stand against protectionism amid concerns that British firms are increasingly being targeted by overseas state-backed investors.

In his first major speech as chancellor, Darling highlighted how Britain has benefited from and continues to welcome inward investment and that it should not slide back to protectionist ways. He said that the UK must resist calls for a collective EU policy for vetting corporate acquisitions by foreign firms. The German chancellor Angela Merkel last week said she was in favor of adopting this U.S.-style procedure saying: ""This is a new phenomenon which we much tackle with some urgency."" Darling's intervention came after a warning Tuesday from deputy Bank of England governor, Sir John Gieve, that the global rise of state-backed funds would create political tension. The speech to the City followed news earlier this week that the China Development Bank and Singapore's Temasek are to take stakes in Barclays bank. In addition, supermarket group J Sainsbury is on the receiving end of a £10.4bn takeover approach from Delta Two, a sovereign wealth fund backed by the royal family of the oil-rich Persian Gulf state, Qatar. Unions have urged the government to block the proposed Delta bid, arguing that it would be against the national interest. Sir John said Tuesday ""The switch of reserve-rich countries from lenders to owners of financial or real assets is also likely to lead to political tensions and pressure for protectionism."" The International Monetary Fund (IMF) and U.S. government warned last month as well that the spread of these ""sovereign funds"" could create new risks for the global financial system. While the UK chancellor praised inward investment he also criticized ""closed"" countries such as China by saying that investment must be a two way process -- stressing that ""free trade should be just that"". (Source: Guardian Unlimited