World of Business

By ROBERT BALL

During the reign of Queen Elizabeth I in the 16th century, Britain became famous for its merchant adventurers, bold entrepreneurs who sailed to the ends of the earth in search of wealth. If that wealth happened to be taken from a Spanish treasure fleet, or if there was a whiff of privateering and freebootery about their operations, that was all part of the game.

Something like that spirit has reawakened in the reign of Elizabeth's namesake, the present monarch. In this similarly acquisitive age, new Elizabethans like Lord Hanson and Sir James Goldsmith appear as contemporary Sir Francis Drakes, wreaking their havoc among clumsy corporate galleons. But the staid giants of British business -- the ships of the line, so to speak -- are hardly less daring in their sorties abroad. Nor have the kingdom's investment managers lagged behind.

A century ago, Britain was the world's main source of international venture capital. The patrimony of overseas assets thus accumulated went to pay the costs of fighting two world wars. By 1945, Britain was, in international terms, broke. Deprived of its underpinning of foreign assets, sterling became a wobbly currency, held precariously upright by a stiff corset of exchange controls. As late as 20 years after the war, Britons were forbidden to take more than (pounds)50 out of the country. Direct investment overseas required special dispensation from the Bank of England; portfolio investment was virtually banned.

In October 1979, the then new Thatcher government, in what the Financial Times calls one of the great turning points in Britain's postwar economic history, abolished exchange controls overnight. The effect was breathtaking. British companies and investors seized the new freedom with both hands. In recent years, net foreign direct investment by British companies has run between $55 billion and $70 billion a year; net portfolio investment abroad, almost nonexistent before 1979, is around $170 billion. In terms of its net foreign asset position, Britain ranks third in the world after Japan and West Germany.

As international takeover artists, the British leave everybody in the dust. Sizing up overseas opportunities is a talent that seems to come naturally to British businessmen, for whom Canada is often closer than Calais. British companies typically invest $1 on acquisitions abroad for every $3 they spend at home, an astonishing ratio considering that the equivalents for France and Japan, runners-up in the takeover league, are 1 to 16 and 1 to 79 respectively. A survey of cross-border takeovers by KPMG Peat Marwick accountants last year showed that British companies spent four times as much on foreign takeovers as their nearest rivals from France and Japan. Nowhere is this activity more evident than in the U.S. The U.S. Commerce Department puts total direct foreign investment in the U.S. at $390 billion, of which $123 billion is British, double the amount for second-place Japan. At the start of the '80s, Britain's stake in the U.S. was under $10 billion. Of some 20 FORTUNE 500 companies taken over by foreigners in the past five years, more than half fell to British buyers.

Within a decade, Britain's entrepreneurs and investors have re-won an empire on which the sun never sets and restored the kingdom to its position as a major international creditor and provider of capital. That's not a situation that squares with decline-and-fall scenarios. As the Financial Times notes, this newly created patrimony is "a large nest egg for when North Sea oil runs out." It -- and the freedom that made it possible -- may be Thatcherism's most enduring legacy.