Insider Media Limited

Business secretary Vince Cable has vowed to re-open the ‘Cadbury law’ debate after declaring that many takeovers and acquisitions are “driven by short-term financial incentives”. Cable has introduced an independent Takeover Panel to ease any potential backlash caused by deals such as the hostile takeover of Birmingham-based Cadbury earlier this year.

Birmingham Chamber of Commerce told Insider: “A sense of stability is what businesses are asking for – now we need the government to get on with it and turn their words into actions.”

Cable's comments, addressed to members at the annual CBI conference, came as he launched his review A Long-Term Focus for Corporate Britain – a call for evidence.

The business secretary said that the inquiry’s Takeover Panel would consider proposals to change the dealmaking system. These include a pre-notification of the intention of any merger “to bolster the ability of the competition authorities to preserve competition”.

The inquiry into the way that takeovers are handled was launched following the controversial buyout of chocolatier Cadbury in February this year. US food giant Kraft purchased the company for £11.7bn.

A spokesman from Birmingham Chamber of Commerce told Insider that “any legislation which cuts down on red tape is a positive move”.

He said: “There has been a reluctance amongst businesses to invest in the long term, and instead concentrate on the short-term benefits [of takeovers] because of the economic climate. Any move which increases the stability and certainty amongst businesses has to be a good one.

“Now we need the government to take action.”

However, not all organisations are as optimistic about the longevity of Cable’s plans.

John Rider, West Midlands chairman of the Institute of Directors (IoD), warned that “the takeover process should not be allowed to become politicised through lobbying activities".

He added that although his organisation was “supportive” of attempts to reduce short-termism in the UK economy, Cable’s review was “extremely wide ranging”.

He said: “It pulls together a number of issues that have already been considered in detail by earlier official investigations into corporate governance. It is yet to be seen whether this latest review can add much to this earlier work.

“In addition, it should be stressed that, although the recent crisis revealed significant failings in financial sector governance, there has been no such systemic failure in the corporate governance of non-financial companies. We are satisfied that the overall UK governance framework remains broadly fit for purpose."