Previous Next Revealed: the quiet US takeover of Britain’s arms industry The Telegraph 7 hrs ago Howard Mustoe © Finnbarr Webster/Getty Images defence sector – Finnbarr Webster/Getty Images City fund managers have lost their grip on the defence industry, stoking official concern about the sovereignty of critical British technology.
The sector has seen a dramatic shift as US-based investors now own almost twice the share value of UK money managers, Telegraph analysis reveals.
A decade ago, shipbuilder Babcock was 58pc owned by British investment houses, but now that figure has slipped to 37pc.For Rolls-Royce the shift is from 37pc to 7pc and for top defence contractor BAE the move is from 38pc to 26pc.
Meanwhile, US investors have hoovered up the shares, owning 54pc of BAE, 71pc of Rolls and 49pc of Babcock.
While the Government has a veto on foreign takeovers of BAE Systems and Rolls-Royce, some industry bosses are concerned the shift in gravity towards the US strains their connection to Britain.For smaller companies without state-held golden shares, it threatens their independence.
Rolls-Royce has had two demanding US investors in recent years, with ValueAct Capital requesting a board seat, which it got before it sold out in 2020, followed by Causeway Capital, which has a 7pc share, and said last year said it wanted more engineers on the board.
The shift has sparked concerns over whether investors could demand that less sensitive parts of the businesses be sold off or that the companies should refocus themselves to better reflect their owners.
It comes amid a transatlantic row over the fate of Ultra Electronics, a London-listed supplier of top-secret submarine technology which is being targeted for a buyout by the American private equity firm Advent.The UK Government is reviewing the deal on national security grounds , prompting anger in the US that has cast a shadow over intelligence cooperation.
© Provided by The Telegraph Ultra Electronics has technology used in the Eurofighter Typhoon jet – REUTERS/Johanna Geron One senior industry figure said: “While they can’t take most of these companies private, it is difficult to imagine US investors have bought these shares out of the goodness of their hearts.”
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But the US has shown itself as far more adept in throwing its weight around in getting what it wants in deals.
Many ethical pension funds will not invest in defence firms, lumping them in with oil and tobacco producers.For instance, the £3bn Royal London Sustainable Leaders trust, one of the UK’s biggest, avoids armament manufacturers, nuclear-power generators, and companies that conduct animal testing.
In December, Babcock boss David Lockwood made a plea to investors , saying that a greener economy was not possible without sound security.
Some of the shift is down to the expansion of large US pension funds such as BlackRock and Fidelity into markets such as the UK.But the data suggest that previous large domestic holders of the companies such as Legal & General and Invesco have reduced their shareholdings.
Meanwhile, big US defence firms Boeing, Lockheed Martin, Raytheon, General Dynamics and Textron are all at least 87pc owned by US-based money managers.
A retrenchment of investors has meant bargain hunting has come from some unlikely quarters.
Christopher Harborne, 59, a Thailand-based businessman who has given £13.7m to Reform UK, formerly known as the Brexit Party, has quietly built up an 8pc holding in QinetiQ, which makes robots for the military and is developing top-secret laser weapons technology.
There are some signs that big investors may soften their stance on arms makers.
SEB, one of Sweden’s biggest banks, weakened a long standing ban on arms investments recently for some of its funds.And Italian arms maker Leonardo said the EU should keep defence investments off the naughty list on its forthcoming investment classification scheme.
Babcock, Invesco, Rolls-Royce, BAE Systems and Legal & General declined to comment.
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