EEF Response to Takeover Panel Consultation | EEF

EEF Response to Takeover Panel Consultation

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Today EEF responded to the Takeover Panel’s consultation on the proposed changes to the Takeover Code. Below is a summary of our response and our position on foreign takeovers.



1. Foreign investment has, on the whole, been a force for good in the UK, importing not just capital but technology, production skills and better management.


2. But we know from experience that FDI does not always have a positive impact on the host country. FDI, depending on the investor and situation, can lead to job losses, factory closures, the hollowing out of domestic supply chains and asset stripping, with a number of high profile examples in the UK often cited as prime examples of “bad” FDI.


3. The UK currently has one of the most permissive frameworks to foreign takeovers in the world and is therefore more vulnerable to the potential adverse effects. We therefore welcome the renewed discussion on the UK’s framework, on back of the Takeover Panel’s consultation as well as the Government’s recent Green Paper on foreign investment in critical infrastructure.


Takeover Panel’s proposed changes:

4. The proposed changes to the code which will require bidders to make clearer their intentions post takeover regarding research and development facilities, jobs, corporate headquarters and pension schemes in a timely manner, is recognition that when considering a bid, shareholders need to be able to consider the wider macroeconomic effects of the takeover. In order to do this, bidders “intention statements” need to be clear, and easily quantified, which up until this point, they have not been.


5. The proposed changes are therefore a step in the right direction, to strengthen the UK’s takeover framework, and mitigate against the negative effects we have seen in the past.



6. However we believe the changes need to go further, to specifically include the supply chain impact of takeovers, which are currently overlooked, and which are a concern for our members.


7. There is however a more fundamental, underlying issue with the current framework that needs to be addressed. This relates to the assurance based approach that underpins the Takeover Panel, and its lack of powers to enforce them.


EEF’s proposal:

8. In order to ensure that the UK is a net benefactor from foreign investment, we need to move away from an assurance based approach, which cannot hold acquirers accountable for not delivering on their assurances.


9. The proposed changes to the Takeover Code therefore need to be part of a wider new framework which strikes a better balance between ensuring the protection of key economic assets, whilst retaining the UK’s openness to beneficial foreign investment.


10. EEF’s new proposal would see a new, Foreign Investment Evaluation (FIE) process carried out by an Independent Panel to maintain political neutrality. The panel would take into account the wider effects of a takeover, such as the impact on supply chains or loss of technological capability, before determining on balance whether the takeover would be beneficial for the UK economy. If the takeover fails the FIE then the Independent Panel would inform the Secretary of State for Business who can then block it.


You can read our detailed policy proposal here.



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