We must strengthen British capitalism

With yet another by-election jamboree announced in the midst of another heat-wave, it would have been easy to miss news that may be more consequential for Britain’s long-term future. On 6 July it was announced that US media group Comcast has bought British broadcaster ITV and US private equity group Castlelake has taken over EasyJet. All sorts of firms are of course routinely bought and sold — what makes these two cases noteworthy is the insight their purchase gives us into how poorly British capitalism is serving our national interests. 

First, it is worth noting that both ITV and EasyJet are exemplars of British entrepreneurship. ITV is the oldest commercial network in the UK and as the name “Independent Television” suggests, it was set up in 1955 with the express purpose of offering competition to the state broadcaster, the BBC. While ITV is not widely known outside of Britain, EasyJet on the other hand — founded in 1995 — is a name that will always be synonymous not only in Britain but across Europe for pioneering low-cost airline travel for the masses. Indeed, for all the opprobrium heaped on Brexit Britain by EU politicians, EasyJet did more to boost European integration — that is to say, the integration that matters, between peoples rather than transnational bureaucracy — than any Brussels Eurocrat. The fact that two such storied companies have not remained in British hands testifies to an enduring weakness of British capitalism — the ease with which its champions are swallowed up by foreign firms. What is about British capitalism that makes it so vulnerable to foreign capitalists and private equity take-overs? 

This takes us to the second point of concern. If ITV and EasyJet were exceptions, that would be one thing. Looking at the British economy as a whole however, it has been systematically annexed by expansionist American firms since the Great Financial Crash of 2008. British entrepreneur Angus Hanton described this process in his brilliant 2024 book Vassal State: How America runs Britain. As the examples of ITV and EasyJet show, things have got worse in the last couple of years. That so much of US corporate expansion today takes the form of murky private equity firms, with the consequent extraction of wealth channelled through off-shore tax havens, makes it difficult to estimate the precise extent of US ownership of the British economy. Using US government statistics, Hanton suggested that the full extent of US ownership might be as high as $2 trillion (the overall size of the British economy is currently estimated in nominal terms at just over $3 trillion). As Hanton notes, dozens of household company names in Britain are owned by US firms. The businesses taking over ITV and EasyJet already own significant tranches of British business: Comcast owns Sky, and Castlelake have significant interests in the British hospitality sector.

Why care about foreign ownership of firms in a competitive global market? If British consumers do not suffer, what does it matter if our firms are foreign owned, especially if it means more investment in Britain? Such a view presumes, of course, that the US state operates like the British state — that it does not defend the interests of its major firms and does not pursue economic statecraft. However the very fact that US companies have made such inroads into the British economy shows that the opposite is true — that it is not merely a matter of a global market operating independently, but of active government support for US companies. Trump has made this a feature of his transactionalist approach to diplomacy, but even prior to Trump the US could not have occupied the core of the global economy for so long without active support for America’s corporate expansion overseas. 

At the same time, the British economy is exceptionally open to foreign penetration and ownership. In his book Hanton cites the former City minister, Lord Paul Myners, saying “Britain is open for business in the same way that a car boot sale is open for business.” UK takeovers can be effected relatively swiftly, cheaply and rarely subject to legal challenge. It is also worth stressing that private equity takeovers are not an external investment in a country equivalent to opening up a factory with new machinery. Private equity is a business model dominated by US firms and premised on wealth extraction and tax arbitrage rather than productivity-enhancing investment. The fact that these profits are repatriated through off-shore tax havens that squirrels them away from HMRC to then be taxed by federal authorities in the US, is, Hanton suggests, effectively a subsidy by the British tax-payer to the US treasury. What is more, the record of private equity companies in asset-stripping and consolidating firms they take over does not bode well for British holiday makers in future. With the ITV take-over, a vast swathe of British broadcast media is not only foreign-owned but also now concentrated in the hands of a single company. 

It has been argued that being so heavily intertwined with the US economy is in Britain’s interest, given how closely allied we are to the US and dependent on them. The trouble with this argument is that we have bound ourselves more tightly to the US in precisely the same time in which not only has the US margin of supremacy in world affairs eroded, but also at the same time as the US has explicitly shifted its strategic attention westwards, to the Asia-Pacific. Ironically the US controlled less of Britain’s economy when it was stronger in world affairs. 

Even more worryingly, in this same period President Trump has menaced the sovereignty of our North Atlantic allies and neighbours, Canada and Denmark (Canada of course also being a realm of the Commonwealth of which King Charles III is head of state). Trump has justified his expansionist threats by saying that the US is entitled to Greenland because the US provides its defences. How far could that argument extend across the North Atlantic? Does Trump’s case for expansion become stronger the more economically dependent another country is on the US?  

Our national independence demands a stronger British capitalism, and that requires a stronger state

British politicians have never justified Britain’s openness to foreign, especially US, capital as a deliberate strategy of seeking US protection and oversight. After all, such an argument would be unlikely to appeal to the electorate given how unpopular Trump is with the British public and the fact that we voted for Brexit ten years ago. Whatever national interest arguments may have existed for intertwining ourselves with the US economy once upon a time, they make little sense in a world in which the US is actively pursuing America First policies. If we value our independence, then there is a clear national interest in strengthening British capitalism. Crucially, this would involve not only stripping away the national-level red tape that hobbles so many British companies in competing with foreign firms, but also more extensive state oversight — perhaps through a mechanism of taking “golden shares” across certain key sectors as the Trump administration is doing with strategic firms such as US steel.

The new post-hegemonic global order demonstrates how the tedious ideological jousts that still occupy so much of the British media — capitalism versus socialism, free markets versus state ownership, trade versus autarky — align so poorly with the scope of the challenges that confront us. Instead of assessing economic policy by how far it moves us along some facile spectrum between communism and free markets, we should be assessing it by how well it serves our national interest. Our national independence demands a stronger British capitalism, and that requires a stronger state.