As yet another national asset is lined up for takeover by a foreign buyer, Selwyn Parker investigates the controversy over the sale of strategically important British companies on the open market

UST four years ago there were five, now there is one, and soon there might be none at all. In a move that would have been unthinkable in the days when Britannia ruled the waves, the likely takeover of Edinburgh-based Forth Ports will see the last of Britain's listed major ports companies falling into foreign hands.

The move has raised not a murmur of political protest, illustrating once again that Britain is more relaxed than any of its competitors about foreigners buying assets of strategic national importance. While the Germans, the Americans and the Japanese would not dream of letting certain businesses go foreign, there are few things that have not been for sale in UK plc. From energy to telecoms and airports to the stock exchange, the red carpet has been rolled out to foreign money.

Forth Ports is being stalked by Australian infrastructure group Babcock & Brown, whose PD Ports subsidiary has already bought Teesport, the collective name for the ports at Teesside and Hartlepool. Even if Forth manages to fight off Babcock, shipping sources predict it will eventually go the way of the rest of the coastal terminals that formed the backbone of Britain's supremacy over the high seas. Today, the biggest ports are variously owned by interests based in Australia (Babcock), Hong Kong (Hutchison Whampoa's HPH), Dubai Ports World and a Jersey-registered international consortium whose foreign investors include Goldman Sachs and a Canadian pension fund.

The only major ports to remain in British ownership are Glasgow's Clydeport, which is the Scottish west coast's major Atlantic-facing terminal, and Liverpool. Both are in the hands of privately-held Peel Ports under the control of the north of England's Whittaker family.

Not that anyone in that industry seems to mind the way things are going.

"The reality is we treat each port on its merits," says Robert Lomas, manager of the International Association of Dry Cargo Owners. "We deal with privately-owned and publicly-owned ports all over the world."

The situation is nevertheless markedly different elsewhere. "Britain is the odd man out, unique in Europe," explains David Whitehead of the British Ports Association. "Most European ports are owned by municipalities."

In Europe, public ownership is supported on the grounds that ports as well as other major pieces of infrastructure are considered to be of strategic national importance. In addition, say shipping sources, it is faster, easier and often less expensive for publicly-owned ports to invest in expansion when planning and other essential approvals are also handled by the authorities.

In the US, meanwhile, after DP World bought P&O's businesses in 2005 - including an interest in more than 20 American ports - the Senate blocked the move on the grounds that it represented a security risk. DP World was forced to sell the US assets to a US company and no longer has, it confirmed to the Sunday Herald, any interest in those businesses.

This scenario repeats itself from one industry sector to another. While Britain gives the go-ahead to each foreign takeover as it comes up, making it a good citizen under EU law by promoting cross-border investment, the leaders of other countries, notably France, have flatly refused to sign off takeovers that, in their view, threaten their economic independence.

Indeed, French president Nicolas Sarkozy has virtually promised to take a fight to Brussels on the issue, arguing that France has a right to determine the ownership of businesses in what it deems to be its critical industries while still encouraging foreign investment. Similarly, German chancellor Angela Merkel has said nations should be free to preserve the national ownership of their star companies such as BMW, Porsche and Mercedes-Benz. The situation is little different in the US and Japan, not to say anything about the notoriously nationalistic Chinese.

That there is no level playing field seems to have made little difference to the UK Treasury, which has in the last two years rubber-stamped the sale to foreign owners of a swathe of industry-leading companies in energy, banking, telephony and television, shipping, rail, aviation and retailing among others.

Four of the biggest were O2 to Spain's Telefonica for £17.7bn, BAA to a consortium led by Spain's Ferrovial for £10.3bn, plasterboard manufacturer BPB to France's St Gobain for £3.9bn, and P&O Steam Navigation to Dubai for £8.2bn. The government was even prepared to approve the sale of the London Stock Exchange in 2004 in the event of a successful takeover, although this has not so far happened.

The overall result is that foreigners hold a far greater stake - and therefore control - in the economy than even two years ago. "Britain is the tart of Europe,"said one source. "It is willing to sell its assets to the highest bidder."

However, economists point out there are advantages in being seen as a safe haven for foreign funds. The flow of foreign direct investment from the sale of plum UK-owned assets has helped offset the yawning gap in the trade and current account deficits. Even with all the foreign deals, the latest official statistics suggest the trade deficit is heading for a shortfall of £84bn over the whole of 2007. The £20bn current account deficit in the third quarter of last year was meanwhile described by economists as "shocking".

As the world's second-biggest recipient for foreign investment behind America, Britain banked £80.3bn from asset sales in 2006, or 40% more than it invested abroad.

The accelerating rate of foreign direct investment has also boosted the earnings of the City, many of whose institutions are also foreign-owned. Financial services are the UK's biggest earner, contributing a surplus of nearly £20bn to the trade balance and accounting for 8% of GDP.

Ken Gibbons, director of the Ports and Terminal Group, which sells UK-developed services and technology around the world, meanwhile argues that you also have to distinguish between ownership and management. Others counter, however, that local management becomes an irrelevance when foreign owners tell them to slash jobs during a downturn while protecting their home assets.

But is there nothing Britain would not sell off? The Treasury does not have an official list of what might be off limits, but London think-tanks say it would be a very short one. About the only assets it would not sell are its air force and new fleet of destroyers. However, European investors already have a stake in some of our military bases.

"There is always a knee-jerk reaction to the sale of patriotic assets," says Tim Knox of the Centre for Policy Studies in London. "It is emotionally difficult when people with whom a nation has not had long historical ties ends up controlling your infrastructure." For instance, the sale of Madame Tussaud's to Dubai raised some hackles before it was approved.

But Knox adds: "If there are good economic reasons for the sale, we should be relaxed about it. Foreign direct investment is like free trade. It is the least imperfect way of transferring financial resources globally."

Proposed purchases for hostile rather than economic purposes would, however, be seen as a different matter. According to one source, the sale of a major energy business to a state-owned company from Russia, which is accused of seeking monopolistic control of gas supplies across Europe, would probably fall into that category. If the rumours about Gazprom's interest in Centrica, owner of British Gas and Scottish Gas, are true, this might soon be put to the test.

The only other time when foreign direct investment seems to be a problem is in the event of hostilities between the UK and the investing nation.

"The key is the investment should make economic sense," says an economist. "If it doesn't, the situation changes."

Troubles in Iraq aside, that thankfully looks unlikely at present. But with the economy cooling rapidly, there are some who fear Britain's loose attitude to strategic assets could come back to haunt it. If its key businesses start to suffer cutbacks, possibly to the extent of damaging security, it seems inevitable that everyone will blame the government. All the ardent free-marketeers in the City will be nowhere in sight.