TIME: Almanac 1993/TIME Almanac 1993.iso/time/061190/0611206.000

Text File | 1992-08-28 | 3.8 KB | 83 lines

                                                                                BUSINESS, Page 47

WORLD OF BUSINESS 

The New Elizabethans


By Robert Ball


    During the reign of Queen Elizabeth I in the 16th century,
Britain became famous for its merchant adventurers, bold
entrepreneurs who sailed to the ends of the earth in search of
wealth. If that wealth happened to be taken from a Spanish
treasure fleet, or if there was a whiff of privateering and
freebootery about their operations, that was all part of the
game.

    Something like that spirit has reawakened in the reign of
Elizabeth's namesake, the present monarch. In this similarly
acquisitive age, new Elizabethans like Lord Hanson and Sir
James Goldsmith appear as contemporary Sir Francis Drakes,
wreaking their havoc among clumsy corporate galleons. But the
staid giants of British business -- the ships of the line, so
to speak -- are hardly less daring in their sorties abroad. Nor
have the kingdom's investment managers lagged behind.

    A century ago, Britain was the world's main source of
international venture capital. The patrimony of overseas assets
thus accumulated went to pay the costs of fighting two world
wars. By 1945, Britain was, in international terms, broke.
Deprived of its underpinning of foreign assets, sterling became
a wobbly currency, held precariously upright by a stiff corset
of exchange controls. As late as 20 years after the war,
Britons were forbidden to take more than 50 (pounds) out of the
country. Direct investment overseas required special
dispensation from the Bank of England; portfolio investment was
virtually banned.

    In October 1979, the then new Thatcher government, in what
the Financial Times calls one of the great turning points in
Britain's postwar economic history, abolished exchange controls
overnight. The effect was breathtaking. British companies and
investors seized the new freedom with both hands. In recent
years, net foreign direct investment by British companies has
run between $55 billion and $70 billion a year; net portfolio
investment abroad, almost nonexistent before 1979, is around
$170 billion. In terms of its net foreign asset position,
Britain ranks third in the world after Japan and West Germany.

    As international takeover artists, the British leave
everybody in the dust. Sizing up overseas opportunities is a
talent that seems to come naturally to British businessmen, for
whom Canada is often closer than Calais. British companies
typically invest $1 on acquisitions abroad for every $3 they
spend at home, an astonishing ratio considering that the
equivalents for France and Japan, runners-up in the takeover
league, are 1 to 16 and 1 to 79 respectively. A survey of
cross-border takeovers by KPMG Peat Marwick accountants last
year showed that British companies spent four times as much on
foreign takeovers as their nearest rivals from France and
Japan. Nowhere is this activity more evident than in the U.S.
The U.S. Commerce Department puts total direct foreign
investment in the U.S. at $390 billion, of which $123 billion
is British, double the amount for second-place Japan. At the
start of the '80s, Britain's stake in the U.S. was under $10
billion. Of some 20 FORTUNE 500 companies taken over by
foreigners in the past five years, more than half fell to
British buyers.

    Within a decade, Britain's entrepreneurs and investors have
re-won an empire on which the sun never sets and restored the
kingdom to its position as a major international creditor and
provider of capital. That's not a situation that squares with
decline-and-fall scenarios. As the Financial Times notes, this
newly created patrimony is "a large nest egg for when North Sea
oil runs out." It -- and the freedom that made it possible --
may be Thatcherism's most enduring legacy.