UK ministers make Gallic gesture to keep the British in BP

British politicians scoffed at France in 2005 when it moved to protect the "strategic" yoghurt-maker Danone from a foreign takeover. But are there signs that laissez-faire UK is becoming a bit more Gallic?

Downing Street has discreetly let it be known in the City that it would oppose any takeover of BP, the British company that was weakened after the Gulf of Mexico oil disaster five years ago this week. BP declined to comment.

Although no takeover bid has been mooted, the prime minister's office has sent a signal into the markets that it would make life difficult for any bidder. It wants to maintain BP and Royal Dutch Shell as two big British companies in the global oil market.

The move follows the decision last year - albeit late in the day - by David Cameron's government to throw sand in the gears of a proposed takeover of Anglo-Swedish AstraZeneca by the US drugs company Pfizer.

In both cases, a view has been taken that some companies are so important to the country's strategic interests that ministers cannot stand aside and allow market forces to take their course.

This is a departure. Both Labour and Conservative governments have in recent years prided themselves in presiding over a wide-open economy that welcomes inward investment.

Lord Mandelson, the former business secretary, felt the political heat of that stance in 2009 when Cadbury, a British confectioner, was bought by US-based Kraft in an initially hostile takeover.

The Labour peer has argued that restrictions are needed in the case of some takeovers. But he said: "There is a question about whether government can make a judgment - and with what expertise - on whether a takeover would have a damaging effect on a company's development."

So what has prompted the change of heart? The AstraZeneca case was the catalyst, after Conservative ministers who initially promoted the Pfizer bid as a vote of confidence in UK science found themselves on the wrong side of public, scientific and political opinion.

As more details emerged of the bid - with questions raised about whether it was driven by US tax considerations and could lead to UK job losses - Mr Cameron decided to make onerous demands on the bidder over its British investment and employment plans.

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"The basic Conservative position is that any sort of state intervention - even to protect a taxpayer-funded asset such as science investment - was not ideologically desirable. It should be left to business to fight it out."

But Mr Cameron and his ministers concluded that the political cost of laissez-faire in the case of AstraZeneca was too high. In the end, Downing Street's list of demands helped scare off Pfizer.

The episode highlighted the limited legal powers for British ministers to intervene under European competition law - with opt-outs only for deals with implications for media plurality, financial stability and national security.

The government, however, does have other tools to dissuade unwanted predators. In the case of Pfizer, it is responsible for a multibillion-pound research budget and is a big customer for drugs through the NHS.

In the case of BP, Downing Street hopes that simply by signalling that it wants to preserve the company's independence, it will achieve its objective.

Although ministers could claim that "national security" covers energy security, the case might be seen as flimsy in Brussels. But the government does issue licences in the North Sea and also funds important research.

Mr Cameron is said to want to retain BP as a British company and the UK as a centre for energy research, especially the Aberdeen area. "With Cameron, there's also the issue that this was 'British' Petroleum - don't underestimate that," said one official.

Another UK official said there was a view in Whitehall that any bid by ExxonMobil would be unwelcome because of the way BP has been treated politically and legally in the US after the Deepwater Horizon disaster.

Nevertheless, both Conservatives and Labour stress that while there may be exceptions - Labour wants a new public interest test for scientific research and development - they are determined to keep the doors open to foreign investment.

"I don't think we are becoming more French," said Lord Mandelson. "That really would be quite a leap."

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