ALEX BRUMMER: Business secretary must act on Ultra

ALEX BRUMMER: Business Secretary Kwasi Kwarteng must act without delay before another critical British defense champion disappears

  • Kwarteng says he has an ‘active interest’ in Advent’s offer for Ultra
  • It is believed to be a more determined stance than he took on UK food security following Fortress’ agreed bid for supermarket group Morrisons
  • When it comes to national security, Kwarteng has all kinds of powers

Ministers of Affairs, who hold the creed of open markets, have a terrible habit of refusing to intervene in takeovers.

When forced by political pressure to get reassurances about national security, headquarters and working conditions, these are often hastily drafted and full of holes.

This was the case when Melrose bought GKN and businesses could easily be undermined. The breakup of Cobham by asset strippers Advent and the sale of militarily sensitive flight refueling technology to a US competitor is another example.

‘Active interest’: Business Secretary Kwasi Kwarteng keeps an eye on the Ultra dealde

Now, as a cover for Advent, Cobham has made an offer for Ultra Electronics that, on the face of it, looks like a full-priced offer. In addition to work on the Eurofighter and the F-35, Ultra is an essential part of NATO’s sea defense against the Russian bear.

As we report today, Ultra’s sonobuoys and electronic warfare play a critical role in tracking Moscow’s behavior in the Mediterranean and other waters.

To his credit, Business Secretary Kwasi Kwarteng says he has an ‘active interest’. It is believed to be a more determined stance than he took on UK food security following Fortress’ agreed bid for supermarket group Morrisons. When it comes to national security, Kwarteng has all kinds of powers.

On the basis of the Enterprise Act 2002, he can intervene in defense of government lands. A pastor, Andrea Leadsom, ordered a national security assessment of the Cobham deal, but nodded it anyway in the middle of the night, even though an edited report found it contrary to the national interest.

The new National Security & Investment Act will not become fully operational until January 2022. That hasn’t stopped US law firms from seeking pre-approval for certain deals, recognizing unusual retrospective powers in the law.

But most importantly, Kwarteng has the “bully pulpit” of his cabinet status and could drive the boarders away with the right words. He must act without delay before another critical British defense champion does a vanishing act.

Bubble problem

Rishi Sunak lit a fire under UK house prices when he announced a holiday at the start of the pandemic.

The July economic update from the International Monetary Fund warns that soaring house prices are factors that could lead to ‘persistent high inflation’.

The stamp duty breach, which ended in June, has pushed prices up, along with Help to Buy, mortgage guarantees for first-time buyers and competition between providers.

Data from Zoopla shows that house prices are almost a third higher than before the financial crisis. The distribution is variable as urban dwellers have sought refuge in rural and coastal areas during the pandemic.

A rise in prices creates a mirage for new buyers. More help than ever is available, but with prices soaring and average earnings (until recently) falling. National estimates for the first time require a mortgage at 5.6 times the salary at the 3.2 times ratio for two decades.

The jump in the ratio can only lead to widening the gap between generations on a range of topics, from retirement provision to the cost of university education.

The Bank of England monitors prices and the social disturbances caused. There are concerns that lenders in a low interest rate environment may be overexposed to loans. Britain has a history of housing bubbles bursting after excessive exuberance.

The Bank has the tools to calm excessive lending. It could reduce the proportion of loans lenders can spend on mortgages as a percentage of total lending. There is no policy yet, but big brother is watching.

Last stop

Matthew Gregory may have won in his battle with Coast Capital over the £3.4 billion sale of First Group’s two main US companies, yellow school bus and transit.

But he lost the war.

His decision to step down before a successor can be named, with chairman David Martin remaining at the helm, appears rushed.

Gregory’s lack of transparency with the wider range of investors over allegations of child abuse on student buses, the latest in January, is leaving a lingering bad taste, with legal action potentially back on track.

He is a decent person who has closed a pension fund shortfall. But it turned out not to be enough to save his skin.

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