THE chief executive of Royal Mail claims UK utilities have been left as ‘sitting ducks’ for overseas predators because of the narrow and insular focus of UK regulators.
His comments will be seized on by backers of ScottishPower which is facing a hostile takeover bid by German power giant E.on.
Speaking on a visit to Edinburgh, Crozier said he believes the regulators’ focus on the domestic market has hampered UK firms’ chances of thriving in a globalised world.
Crozier, who is seeking to prepare the UK’s postal service for the onset of full competition on 1 January, said price and margin controls at home have left companies sitting ducks for takeover — or perhaps emasculation through unequal competition — from their often better-funded and less constrained overseas rivals.
A former chief executive of the Football Association and advertising agency Saatchi & Saatchi, Crozier said: “We don’t want protection. We want an open playing field. But what we’ve seen is regulators that are happy to reward inefficient competition.”
The then Thatcher government believed that, if the UK was in the vanguard of privatisation and market liberalisation, its companies would be able to go out and conquer the world. “But it hasn’t happened like that, ” said Crozier.
The UK’s approach to regulation has differed from that of its continental neighbours, but has left only five of the 12 regional electricity companies privatised by the Conservative government in 1989-91 in British hands.
Nine of the original regional electricity companies have been subsumed into three continental giants — RWE, E.on and Electricite de France (EdF).
Crozier said: “If you look across UK industry sectors, you see almost all the utilities in foreign ownership. Because by and large they are constrained. What the foreign companies do is they come in, having been permitted by their domestic regulators to make terrific margins back home, and they’re able to use that to buy companies here or to undercut companies here.”
Crozier’s remarks are highly topical because ScottishPower, which was privatised in 1991, is facing a probable hostile takeover bid from German utility giant E.on, valuing the Glasgow group at more than £10 billion. E.on has not yet approached ScottishPower but it is expected to do so soon.
Perth-based Scottish & Southern Energy (SSE) may also enter the fray, sparking a bidding war.
Fraser McLaren, energy analyst at ING in Edinburgh, said: “SSE has in the past demonstrated a very conservative approach towards the value it sees in potential acquisitions. This has not always been the case for E.on.”
Crozier believes that continental European governments have given their own domestic firms a further leg-up by allowing them to treat Europe as their home market, rather than restricting their view to national borders. “But our regulators in all industries very much view the market as UK, ” he said.
The approach on the continent has also almost certainly jeopardised the long-term prospects of the Royal Mail Group, added Crozier.
“If you think about it, these are giant worldwide companies using what they are able to do in their home markets and across the world to come in and undercut us, in this country, and they’re allowed complete flexibility on prices but we are not. So the market is being tilted to their advantage and to our disadvantage, ” he said.
This article was published in the Sunday Herald on 11 September 2005