By Claire West
The CBI has called for the Government’s primary focus in reforming investment guidelines to be on promoting the UK as a place to invest for domestic and foreign companies. But the leading business group said there is a need to encourage investors to take a more long-term view.
In its submission to the Business Innovation & Skills consultation: A long-term focus for corporate Britain, the CBI outlines a mix of policy solutions.
There are several areas of regulation and tax immediately within the Government’s control that it should address to provide more of an incentive for long-term equity ownership. It needs to re-examine solvency and other accounting rules that currently discourage ownership at certain points in the economic cycle. And in its forthcoming “corporate tax roadmap” it should look at how to ensure a level playing field for equity ownership and progressively reward long-term investment in shares.
Matthew Fell, CBI Director of Competitive Markets, said:
“The focus of this consultation should be on the health of the UK economy and its recovery, which depends on business growth and prosperity. This means making the UK an attractive place to invest for domestic and foreign companies. But, there are issues that do need to be addressed to encourage more long-term investment, particularly changes to solvency and accounting rules, and to the tax system.
“There is also a need to establish greater clarity around the areas covered by the ‘public interest’ test. New takeover rules must prioritise transparency and certainty around bids, and the Stewardship and Corporate Governance codes should promote the building of long-term relationships between boards and investors.
“The politicisation of ownership decisions must be avoided, but further clarity on where the national security test might be applied could be useful, for example in the energy and communications sectors and other areas of critical infrastructure.”
The CBI supports many of the proposed changes to the takeover rules including:
· changes to the ‘put up or shut up regime’ that reduce the period of uncertainty for takeover targets
· a flatter structure for advisory fees so as not to bias the outcome of a takeover bid
· introducing greater “truth in takeovers” to ensure sufficient disclosure and accountability around future intentions for the acquired business.
The introduction of shareholder rights for the acquiring company would be difficult to enforce internationally and without this agreement would create an uneven playing field between foreign and domestic bidders.
Finally, changes that have already been made in the new Stewardship Code for Investors and in the revised Corporate Governance Code that encourage a stronger dialogue between companies and investors are welcome. In the early 1980s, only 5% of the UK share register was made up of international investors, in recent years that number has risen to 40%. It is therefore crucial to achieve an improved dialogue with international investors.
