It’s easy to see why Arm Holdings, the UK’s only global-scale internet technology company, looked worth a quick £24 billion bet by Softbank of Japan. At $1.32 to the pound, the price is a lot cheaper than it could have been before polls closed on 23 June, when sterling stood at $1.50; that made it easy for Softbank to offer a fat premium over last Friday’s closing Arm share price — and harder for Arm’s board to say no.
As for Arm’s business, it’s unlikely to be knocked by Brexit since its microchips are priced in dollars and sold chiefly to smartphone makers in Asia and the US. And its prospects — in the development of the ‘internet of things’, from driverless cars to WiFi-powered kitchens — are huge. So I raise my sake cup to Masayoshi Son, the entrepreneur behind Softbank, who clearly believes he has snapped up a timely bargain.
But if it’s good for him, is it bad for us? Is there such a thing as a win-win in the international takeover arena, even when there’s a promise to keep Arm in Cambridge and add 1,500 jobs over the next five years? Optimists point to the success of Jaguar Land Rover under Indian ownership, but other episodes are less encouraging.
The 2011 sale to Hewlett-Packard of Autonomy — a software venture also based in Cambridge and specialised in ‘big data’ analysis — turned into a farrago of flying writs, as HP accused Autonomy of ‘misrepresentation’ while Autonomy founder’s Mike Lynch claimed HP mismanaged the business. A different example is Pilkington, the St Helens-based company that was once the world leader in glass technology: since it was bought by Nippon Sheet Glass in 2006, its name has rarely been heard again.
The truth is that new Chancellor Philip Hammond was being as opportunistic as Mr Son when he called Softbank’s Arm purchase ‘a big vote of confidence in British business’. Yes, it’s a compliment to one particular flowering of British science. But the truth is that we have no other global-scale digital businesses to compare with Arm, and we do not have an investor community to match California’s Silicon Valley that puts capital behind the long-term growth of such businesses, which is why they end up owned by foreigners.
British managers have lost control of a landmark enterprise to a Japanese conglomerate which could be an awkward parent (its ownership of wireless networks may compromise Arm’s neutral position as a chip supplier, for example) and which may or may not be capable of keeping five-year promises in a fast-evolving industrial landscape. Of course multi-billion-pound investments from abroad are what’s needed to re-boost confidence — but this one is likely to prove a mixed blessing.
Spot the unicorn
Now that Arm and Autonomy are in foreign hands, how many other unicorns can we claim? ‘Unicorn’ is tech-world parlance for a start-up that grows to be worth a billion dollars. The UK nurtures more of them than any European nation — though a fraction of the number created in the US or China. So what do unicorn lists tell us we’re good at? ‘Fintech’ (financial technology) is the most promising answer, with companies such as peer-to-peer business lender Funding Circle and money-mover Transferwise. Then there’s our obsession with property porn, hence the success of Zoopla and Rightmove. And our couch-potato love of takeaways and online shopping, hence JustEat and AO World. But is there a fledgling Arm, a global player for the 2020s lurking near London’s Silicon Roundabout or in Cambridge’s Silicon Fen? Tell me if you think you’ve spotted one: email@example.com.
Affordable soon? Not likely
A jump in the affordability of homes for workers in London would be a welcome Brexit consequence. What’s happening so far? Property research firm LondRes reports widespread cutting of asking prices, and sale completions down by 43 per cent on a year ago. Robert Bartlett, chief executive of Chestertons estate agency in Mayfair, tells me that at the upper end of the central London market, ‘the drop-off in transaction volumes is as bad as it was after the financial crisis in 2008’ but that in reality there has been a gradual decline since the spring of 2014, fuelled by George Osborne’s stamp duty increases and the tax on ‘enveloped dwellings’ held offshore. In any case, he says, ‘There are only so many global multi-millionaires who want to come to London, and most of them have houses here already.’
As these effects ripple downwards, might you soon be able to buy a one-bed flat in Muswell Hill or Balham, or the new Utopia that is Old Oak Common, for an almost-affordable £300,000? Not likely, I fear. The fall in the pound translates to a £40,000 discount for a foreign buyer on an average London house price, and lower reaches of the market are now reported to be crawling with bargain-hunters from overseas. As Bartlett says, ‘In reality, the property playing-field is even less level for Londoners than it was two years ago.’
Days of villainy
I’ve been treading the boards again, in a cameo appearance as Sir John Falstaff for our Ryedale music festival, cultural highlight of Yorkshire’s summer. For method-acting purposes, I imagined ‘plump Jack’ as one of those overblown investment bankers of recent memory, such as Bruce Wasserstein of Lazards or Bill Harrison of Shearson, Flemings, Barclays and everywhere else: fighting over taken purses, overhyping asset values (‘bonds of forty pounds apiece’) and for hire to the highest-paying client (‘He that rewards me, God reward him!’). Still — like the new Foreign Secretary, whom he also resembled both in bonhomie and in looseness with the truth — Falstaff must have been fun to hang out with in taverns. And in an autumn of uncertainties we may all feel the need, as he did, to forswear thin potations and addict ourselves to sack.
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