H79WFA Volvo auto parts CV Drive Axle, Constant-Velocity Joint automotive transmission part isolated on white background
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The controversy is just not going away. One UK company, Melrose, an industrial turnround specialist, wants to buy another, the automotive and aerospace parts supplier GKN, for £7bn. A wide range of forces are vocally arrayed against the transaction, including newspaper columnists from left and right, a conservative government’s defence secretary, and opposition Labour party leader Jeremy Corbyn. A letter from 16 MPs from three parties warns that GKN may be “dismembered”, and that parts may “disappear” — an argument echoing Mr Corbyn, who suggested that GKN may be “sacrificed so a few may make a quick buck”.

The debate has ranged as far as a parliamentary committee hearing on Tuesday, where MPs put questions to executives from both groups about breaking up the company, jobs, remuneration, and pensions.

The fuss is, from one point of view, surprising. It is not just that both companies are British, a strange sort of deal to block on national security grounds. There is also the fact that the military units of the business (as well as 90 per cent of its overall workforce) are not located in the UK. In addition, whatever Mr Corbyn might suggest, Melrose does not have a reputation for “asset-stripping”. Finally, the current management’s plans, which include the eventual sale of the auto division, look very much like Melrose’s. There may be deals that are threats to national security. But the GKN deal simply does not look like one of them.

The noise is all the more unexpected given that another (admittedly smaller) UK industrial company of long standing, Laird, was recently acquired by an American buyout house, without causing so much as a peep of protest. From another point of view, however, the controversy makes sense — and carries an important message for company boards, financiers, and the government.

The UK, despite an economy that is experiencing modest growth, is in a period of real economic anxiety. Wide swaths of the public are uncertain about whether free markets and free enterprise can fulfil their promise to provide broad-based prosperity.

The signs of this are many. In 2016, the country voted to leave the EU, over the protests of most business interests. Today the opposition party — which is running neck and neck with the governing Tories in polls — is pushing a nationalisation programme. It has as its shadow chancellor an unreconstructed Marxist. The government thinks that the housing market needs restructuring if it is to meet demand for homes.

Those who have grown sceptical of markets have vivid examples to point to. In recent years, long privatised UK utilities, most notoriously some water companies, have paid shareholders handsomely while failing customers. A huge private contractor to the government, Carillion, has just been driven into liquidation, apparently by its own short-term thinking.

Markets are not perfect, and without proper regulation they fall into cronyism and oligopoly. Restricting private ownership of businesses and the free movement of capital has a much uglier history, however. The current shift in the public mood should alarm anyone who cares about Britain’s future prosperity. Political risk has long been dismissed by businesses and investors, in the UK and elsewhere. But executive pay packages and shareholder payouts are a legitimate source of concern and companies should take notice. But this is no reason to abandon hard-won gains of market capitalism over the past 40 years. Blocking the GKN deal is a bridge too far.

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