Big companies are pushing governments around

13/11/2018

By Sarah O’Connor

Jim Ratcliffe is the richest man in the UK. He is worth more than £21bn according to the Sunday Times Rich List. The annual report of Ineos, his chemicals company, says it made about €2bn in profit last year. Yet one of the poorest areas in England has just offered to build a factory for him.

That isn’t all it has offered to do. The Tees Valley Combined Authority in the north east of England “threw the kitchen sink at Ineos”, in the words of its mayor, to persuade the company to locate a new car plant on the site of a local former steelworks.

Ineos had let it be known it was choosing between this site, one other in the UK, and a number in continental Europe, for its new automotive venture.

“We offered to clean the site then give them the land for free, to build the factory, a £20m cash grant, a £100m capital allowance to offset against their corporation tax every year, massively reduced electricity rates, cash to train local workers, and a generous tax credit for research investment,” the mayor told the local paper.

It may not be enough: the latest reports suggest Ineos is still considering various other options, including the Ford plant in Bridgend in South Wales.

Sir Jim, who was a supporter of Brexit, is also deciding whether to put a new chemicals plant in Hull in the north of England or Antwerp in Belgium. Financial help from the UK government might “tilt the scales in favour of Hull,” Ineos has said.

You could argue it is rational for companies to play cities and countries off against each other to extract financial sweeteners: their first duty is to their shareholders after all (in Ineos’s case, the biggest shareholder is Sir Jim himself.)

It is also understandable that places like the Tees Valley Combined Authority are doing everything possible to secure local jobs. All five of its
local authorities are poorer than average and one of them — Middlesbrough — is ranked the most deprived in England.

But it is hard to watch one of the most impoverished places in the country offer millions of pounds of taxpayers’ money to the UK’s richest billionaire (who is, by the by, reportedly moving to the tax haven of Monaco) and not feel that something is profoundly broken.

In the US, Amazon has just demonstrated the imbalance of power between companies and governments with characteristically brazen efficiency. Last year, when it announced it was looking for a place to build a second headquarters, it published a document detailing what cities must provide to compete for this chance.

As well as Amazon’s demands for good roads, public transport and educated locals (all things that taxes pay for), the document explained that the size of “incentives” from state and local governments would be “significant factors in the decision-making process”.

It asked for copious detail on the incentives, suggesting governments may need to pass “special incentive legislation in order for the state/province to achieve a competitive incentive proposal”.

It is not always governments that are manipulated. When trade unions in the UK make big concessions to a global manufacturer — agreeing to pension cuts, for example, or less secure contracts for new staff — it is often because the company has threatened it will otherwise move production to plants in lower cost countries.

A few days after the UK voted for Brexit in the 2016 referendum, a Financial Times colleague went to interview workers at the Nissan car plant in Sunderland, where it appeared that jobs could now be under threat. Nissan had wanted the UK to stay in the EU, yet many of its employees had voted to leave.

One of those Leave-voting workers, Steve, told the FT that staff lived under a permanent “dark cloud” of possible job losses anyway, since the plant was constantly in competition with other sites to win new models.

“We have that threat all the time; it’s just been another threat,” he said. The irony, of course, is that leaving the EU will probably make Britain more vulnerable to corporate blackmail as it tries to retain and attract jobs.

Companies should resist the temptation. It might be in the interests of shareholders in the narrow sense, but it is time to widen the lens.

By treating people’s jobs as bargaining chips, and their hometowns as dots on a corporate map, companies are instilling a sense of insecurity in people that is eroding their support for capitalism and globalisation. It will come back to bite them in the end.

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