Foreign investment could give British food and drink producers access to lucrative – and relatively untapped markets. Andrew Larkham reports
As the coalition government sets about getting the country's finances back on track, the food and drink sector is looking like an attractive hunting ground for foreign investors.
Britain may have lost many of its traditional industries but it is still a powerhouse of food and drink producers, processors, retailers and their brands, many of which are potential targets.
Kraft's takeover of Cadbury is the highest-profile example of such a deal, but a more recent sign of the renewed interest in British-based businesses was the £211m acquisition of Tate & Lyle's European sugar business by American Sugar Refining earlier this month.
And this could be just the tip of the iceberg as the weak pound helps to make the price of investment more appealing. Despite recent gains, it is still down 26% against the Euro, and down 25% against the US dollar compared with where it was in 2007.
The government's emergency budget has also sent a strong signal to the international business community that Britain plc is open and ready to do business. In the short term, the budget will probably have very little real impact. However, because the government was able to demonstrate a feasible route to a reduced deficit, it has made the UK a more appealing investment prospect.
The government has so far maintained its 'triple-A' credit rating, which strengthens the position of British businesses looking to borrow and also enhances their appeal to foreign investors.
Likely investment targets could include the British whisky industry, which increased exports by 4% during 2009 to about £3.1bn. There are a number of independently owned distilleries producing well-established whiskies with strong customer bases that would offer sound investment opportunities.
Another contender could be British food processors, particularly those that produce ready meals. The brands such products are sold under and the expertise behind them could be replicated in other areas of the world.
Whatever the target, it is likely investment would come from Asia. With large war chests and a fierce ambition to expand, Chinese firms, in particular, may lead the way.
Attracting Chinese investment is likely to be welcomed by British businesses as it would give them access to foreign markets. Under trade rules in place in China, foreign companies can only access the country's lucrative markets with the help of a local partner.
And, as foreign investment flows in, it will help to redress Britain's trade gap: in the past quarter the UK imported goods and services worth £9.6bn more than it exported.
However, the process will only be a truly positive one if the changes are not at the expense of UK jobs, and foreign interest amounts to long-term investment rather than grab-and-run asset-stripping.
Andrew Larkham is a commodity analyst at Mintec.
As the coalition government sets about getting the country's finances back on track, the food and drink sector is looking like an attractive hunting ground for foreign investors.
Britain may have lost many of its traditional industries but it is still a powerhouse of food and drink producers, processors, retailers and their brands, many of which are potential targets.
Kraft's takeover of Cadbury is the highest-profile example of such a deal, but a more recent sign of the renewed interest in British-based businesses was the £211m acquisition of Tate & Lyle's European sugar business by American Sugar Refining earlier this month.
And this could be just the tip of the iceberg as the weak pound helps to make the price of investment more appealing. Despite recent gains, it is still down 26% against the Euro, and down 25% against the US dollar compared with where it was in 2007.
The government's emergency budget has also sent a strong signal to the international business community that Britain plc is open and ready to do business. In the short term, the budget will probably have very little real impact. However, because the government was able to demonstrate a feasible route to a reduced deficit, it has made the UK a more appealing investment prospect.
The government has so far maintained its 'triple-A' credit rating, which strengthens the position of British businesses looking to borrow and also enhances their appeal to foreign investors.
Likely investment targets could include the British whisky industry, which increased exports by 4% during 2009 to about £3.1bn. There are a number of independently owned distilleries producing well-established whiskies with strong customer bases that would offer sound investment opportunities.
Another contender could be British food processors, particularly those that produce ready meals. The brands such products are sold under and the expertise behind them could be replicated in other areas of the world.
Whatever the target, it is likely investment would come from Asia. With large war chests and a fierce ambition to expand, Chinese firms, in particular, may lead the way.
Attracting Chinese investment is likely to be welcomed by British businesses as it would give them access to foreign markets. Under trade rules in place in China, foreign companies can only access the country's lucrative markets with the help of a local partner.
And, as foreign investment flows in, it will help to redress Britain's trade gap: in the past quarter the UK imported goods and services worth £9.6bn more than it exported.
However, the process will only be a truly positive one if the changes are not at the expense of UK jobs, and foreign interest amounts to long-term investment rather than grab-and-run asset-stripping.
Andrew Larkham is a commodity analyst at Mintec.
No comments yet