Who owns whom

Taken off the menu

Allan Massie

The carved figure of Sir Charles Ten- nant sits outside the family vault on Glas- gow's Necropolis, gazing, as it were, to- wards the St Rollox Works from which rose the huge chimney known as 'Ten- nant's Stalk' spewing pollution over the Victorian city. Tennant is a dominating and troubling symbol of industrial and commercial Scotland. He is also emblema- tic, for the course of his career seems to encapsulate, and also prefigure, much of our business history.

His grandfather, whose own father was a friend of Burns and a witness at his wedding, established the St Rollox Chemi- cal Works, where one of his partners was Charles Mackintosh, the inventor of the

SCOTTISH SPECIAL

waterproof. His son, John Tennant, ex- panded the business, but remained no more than a great Glasgow businessman. Sir Charles Tennant — 'the Bart', as his family called him, — became a truly imperial figure. His interests spread from chemicals to commodity trading, colonial land investment, mining in Spain and Mysore, copper, steel and explosives. He was one of the first West of Scotland industrialists to forge links between the City of London and Scottish manufacturing Industry, and to become a great figure in metropolitan society. Thereafter, though the family remained landowners in Scot- land, and retained business interests in Glasgow, they were incorporated in the British, and City of London, establish- ments.

Something similar happened to other Scottish business dynasties, though some, like the shipbuilders Lithgows and Yarrow, and the engineering firm of Weir, managed to survive as distinctively Scottish. But the tendency of British industry throughout the 20th century, at least until recently, has been centripetal, and dominated by the City of London. Over a long period of time Scottish companies were either susceptible to takeover or lost their national identity by shifting their head offices to London. Two examples of the latter were Wm Collins and the Distillers Company, both eventually taken over in the 1980s, Collins by Rupert Murdoch and Distillers by Guin- ness. Though both maintained production in Scotland, and Collins kept a powerful identity in Glasgow, important head office functions, with the ancillary work that these create for others like corporate lawyers, accountants, advertisers and PR firms, had long been removed to London. Indeed, the code name used by Guinness in the preparation of the bid for Distillers was 'Ascot', because so many of the Distillers' directors lived in the Thames Valley.

The attraction of London drew natural leaders of business away from Scotland. The result was that, as the Scottish eco- nomy entered its long period of decline between the wars, it was deprived of imaginative leadership, and of the self- confidence which such leadership might have supplied. Consequently, the story was increasingly one of retreat, dismember- ment and annexation. The Scottish eco- nomy had expanded in the 19th century, specialising to meet the needs of the British Empire. Its industrial structure was geared towards the production of capital goods required in the economic development of the Empire (and incidentally of the United States), while its financial structure was biased to meet the needs for capital invest- ment overseas. The development of the indigenous economies of the old dominions and the loss of Empire closed markets and rendered much of Scotland's economic structure obsolete. The decline for these various reasons was precipitous and pro- longed. By 1980 — even before the Thatcherite shake-out — only 40 per cent of Scotland's manufacturing labour force was employed in Scottish-controlled firms; foreign capital dominated most of the technologically advanced industries. A leading Nationalist intellectual, Stephen Maxwell, could find it 'difficult to see how Scottish private enterprise — if that phrase any longer has much meaning — could be expected to achieve the necessary regen- eration of the Scottish economy'.

Of course takeovers by outside interests were not — and are not — necessarily bad in themselves. They may revive an apparently moribund company, or revital- ise a stagnant one. When that happens it is obviously to the benefit of all immediately concerned. In some cases, even where there might seem to be a peculiarly nation- al interest, the takeover by the transfer from Scottish to British or foreign own-

SCOTTISH SPECIAL

ership may be advantageous. The Glasgow Herald is a case in point; it has flourished since being bought by Lonrho from its previous owners (Suits, a subsiduary of the House of Fraser). The Distillers Company itself has taken on a new lease of life since the Guinness takeover.

Nevertheless the effect of the takeover of a large company, with the consequent loss of head office functions, the transfer of research and development, and the realisa- tion that career prospects will lead the most talented or most ambitious managers elsewhere, tends to have a debilitating effect on a small country. The argument that the various professions which earn their living by servicing others companies will suffer as a result of such takeovers, is also, on the face of it, seductive.

Yet curiously this has not happened in Scotland. Indeed perhaps the most re- markable development within the Scottish economy in the last 20 years has been the growth of just the sort of bodies of which takeovers were supposed to have deprived us. A quarter of a century ago there was no merchant bank in Scotland; when the young Angus Grossart and Iain Noble planned to set one up, they were told it wouldn't work. They went ahead even so, flourished, and encouraged others to fol- low their example. Now in addition to numerous independents, each of the three. Scottish Clearing Banks has its own mer- chant banking subsiduary. (The Clydesdale was denied one when owned by the Mid- land, encouraged to establish one by its new Australian owners — a good example of a beneficent takeover.) Then the forma- tion of Scottish Financial Enterprise has given a coherence to the Scottish financial community, and encouraged a new robust- ness. Specialist printers, corporate lawyers, PR consultancies, advertising agencies, have all multiplied. There are now 200 members of the Institute of Public Relations in Scotland, where there were only a handful a few years ago. Most remarkable perhaps was the decision of the Scottish Chartered Accountants to reject the recommendation made by the CA Council that they should merge with other accounting bodies in Britain.

The result of this is not only a new-found confidence, but the existence of Scottish bodies which can help a threatened com- pany to resist a takeover, or enable an ambitious one to grow by acquisition. The deferential attitude to the City of London is disappearing. At one time, as Angus Grossart puts it, the directors of a Scottish company would `go to lunch in the City and end up on the menu'. That is less likely to happen.

The 1980s have seen two significant rejections of proposed takeovers. In 1981 The Royal Bank of Scotland was ready, in a week-kneed moment, to sell its inde- pendence in a merger with Standard Char- tered. This provoked a bid from the Hongkong and Shanghai Bank. Almost immediately the alarming prospect raised by the loss of the largest (and at that time only fully independent Scottish bank, for Barclay's then owned 35 per cent of the Bank of Scotland) stimulated resistance. The Scottish lobby was mobilised, and the Royal was compelled to remain indepen- dent as a result of the submissions made to the Monopolies and Mergers Commission. Since then, it has flourished, acquiring a European foothold as a result of a deal with the Banco Santander of Spain.

Then in 1988 the Australian brewers Elders XL moved against Scottish & New- castle. This time the resistance was not only vigorous but aggressive. Elders' finan- cial structure was investigated, and shown to be rickety. S&N's Alick Rankin ruffled a few feathers in the City of London by his lack of deference, but achieved his aim. His company remained independent, and is set to grow. It is unlikely however that he could have won but for the development of a wide range of financial expertise in Edinburgh.

Now the mood of business confidence in Scotland is considerably more bullish than in other parts of the United Kingdom. That itself is something we haven't seen since the 19th century. Even more encouraging is the growing realisation that takeovers can be fought and defeated in the market- place, that the protection of Scottish businesses depends far more on the effi- cient working of a buoyant free market here than on any ring fence erected by politicians. It is accepted that in the inter- national business world some companies will come into foreign (which for the purposes of this argument includes En- glish) ownership; and that this need not be disastrous if at the same time there are indigenous companies which are capable, as many now again are, of expanding beyond Scotland themselves. One may begin even to hope that the wheel has come round, and that Sir Charles Ten- nant's statue may wear an approving smile as it contemplates the recovery from timid- ity and numbing depression, and the res- toration of the old mood of confidence and adventure which characterised his enter- prises and those of his contemporaries.