The era of the UK’s big conglomerates is coming to an end

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Departure

There was a huge stir last week when the most extensive dinosaur trackways ever found in the UK were discovered in an Oxfordshire quarry. The footprints, hundreds of them, were made by huge animals that roamed the Earth 166 million years ago.

Take a closer look and you can see that even in corporate Britain there are traces of the lumbering animals that once dominated the landscape.

Unlike in the United States, conglomerates – giant companies that own numerous businesses in various sectors – have more or less died out in Britain.

It was reined in last Friday Smith GroupThe FTSE-100 engineering company announced a major divestment as it slimmed down its group position.

Smiths (full disclosure — I was paid by the company to record an interview with its chief executive with the publication of its results recently) was founded as a jeweler and watchmaker in 1851, and when Sir Edmund Hillary wore one of its watches in 1953, he and Tenzing Norverga became the first.

And millions of people now see its brand every day as they pass through airport search scanners.

Ironically, Smiths Detection is one of the businesses slated for disposal by chief executive Roland Carter. Smith Medical, a supplier to hospitals worldwide, was sold to California-based ICU Medical in 2022 for $2.7 billion. Then last week it sold Smiths Interconnect, a provider of connectivity solutions including fiber-optics and radio-frequency transceivers, to Molex, an Illinois-based manufacturer owned by the billionaire Koch family, for £1.3 billion ($1.74 billion).

With Smith detection, the dual-track process is underway, with Smith open to either a sale or demerger.

Upon completion, Smith will be down to two businesses – John Crane, a supplier of mechanical seal and filtration products, and Flex-Tech, which supplies fluid and gas heating and moving components.

The break-up, announced in January, was a surprise because Carter, who succeeded Paul Keel as CEO in March 2024, had run both Smith Detection and Smith Interconnect earlier in his career and some investors thought he was married.

When we met recently, he was clear that the breakup was appropriate, arguing that Smith had been misunderstood by investors. There are fewer sell-side equity analysts in the UK than ever before, and those who remain have less time to study businesses in detail. Carter hopes the market will realize that more focused Smiths will deliver better returns. The revaluation is already underway: Since the break-up was announced, Smith’s shares have risen more than 30%, hitting record highs along the way.

The break-up was also surprising because, not long before, the Smiths had turned down calls from activist investor, Engine Capital.

The demerger was opposed by respected businessman George Buckley, who chaired Smiths from 2013 to 2023 and was formerly CEO of 3M, one of America’s largest conglomerates.

He was a staunch defender of the model, telling me in 2014: “Pure plays are wonderful in extended markets and terrible in contracting markets. So I’m a group lover.”

End of an era

The Smiths’ break-up marks the end of an era in which conglomerates dominated the ranks of Britain’s biggest companies. They include BTR, the old British tire and rubber company, whose activities include, among others, chemicals, textiles and packaging. Another was Tomkins, formerly a maker of belts and buckles, owned by Smith & Wesson and Baker Ranks Hovis MacDougall, and nicknamed the “Guns to Buns Group” by journalists. Thorne EMI’s activities included lighting, defense equipment, the HMV record chain, the EMI music label and broadcaster Thames Television.

Trafalgar House was a property company that diversified into construction, engineering, hotels and shipping, and whose properties once included the Ritz Hotel, the QE2 luxury cruise liner and the Daily Express newspaper.

Hanson, most famously, grew from a commercial vehicle business to a building materials, tobacco, coal and energy giant.

All had buccaneering leaders such as Owen Green at BTR, Nigel Brokes at Trafalgar House and Greg Hutchings at Tomkins – hard-driving, ambitious men determined to grow rapidly through mergers and acquisitions, particularly the acquisition of poorly run businesses, and by aggressive and sales-reducing cost improvements to boost financial performance. It coincided with Britain’s zeitgeist of the 1980s when, as interest rates rose to treat the country’s high inflation, many underperforming industrial businesses went to the wall.

They were on the front pages as much as the business pages: James Hanson, for example, dated Gene Simmons and Joan Collins and was engaged to Audrey Hepburn for almost a year.

But it all ended with massive overreach: Trafalgar House collapsed after a failed takeover bid for domestic electricity supplier Northern Electric. BTR’s vast businesses could not compete when globalization began to shape their markets. Tomkins broke himself after Hutchings was fired. Hansen did just that after unsuccessfully bidding for chemical company ICI (itself a former conglomerate that owned drugmaker Zeneca, now AstraZeneca).

Yet traces of the old UK group are everywhere. Imperial Tobacco, once owned by Hansen, is one of the biggest players in its sector globally. Cunard, once owned by Trafalgar House, is a major part of Carnival Corporation, the world’s largest cruise provider. The latter also owns P&O Princess Cruises, once part of another former conglomerate P&O, whose ports and ferries are now owned by Dubai Port World.

Apart from Lonrho, which exists as a small private company operating in sub-Saharan Africa, British American Tobacco is the best-known ex-UK conglomerate to survive, with various locations including insurance companies (Eagle Star, Farmers and Allied Dunbar), retailers (Argos and Saks Fifth Avenue) and Tecka-Paper (the Apple pegging firm).

It broke up on its own in response to a £13.2 billion takeover bid in 1989 – a huge sum at the time – led by corporate raiders James Goldsmith and Kerry Packer and thrived as a pure play.

Smith will hope it continues to have a similarly bright future.

Top TV picks on CNBC

UK Finance Minister Rachel Reeves discusses budget priorities, fiscal discipline and economic challenges amid global volatility in a conversation with CNBC’s Karen Tso.

CNBC’s Ritika Gupta takes the temperature of the UK film industry as US President Donald Trump threatens tariffs in the wake of the BFI London Film Festival.

George Osborne, former UK Chancellor of the Exchequer and member of Coinbase’s Global Advisory Council, discusses stablecoin investment and regulation.

– Holly Eliot

Must know

Britain’s film industry is vulnerable to Trump’s tariff threat. The US president wrote in September that he was considering imposing a 100% tariff on films produced outside the country. This will be a big hit for UK studios, which aside from suffering from weak ticket sales, The US relies heavily on partnerships.

UK finance minister Rachel Reeves said the budget would respond to challenges. On November 26, Reeves will deliver the UK’s autumn budget. As the budget has come in Britain A faltering economy, Inflated prices and an increase in government borrowing costs.

The UK economy was dormant in August. The data showed gross domestic product rose 0.1% month-on-month, as expected by a Reuters poll of economists. July growth data, which initially showed the economy flat Revised 0.1% contraction downwards.

– Yeo Boon Ping, Holly Eliot

Quote of the week

in the market

London-listed stocks have fallen over the past week, with FTSE 100 Falling about 0.4% since last Tuesday. The focus shifted to defense stocks as investors reacted Second meeting Between US President Donald Trump and Ukrainian President Volodymyr Zelensky.

Meanwhile, concerns about credit quality in the US spread across the Atlantic and Europeans sold off. Bank stocks on FridayAlthough the area recovered quickly.

The British pound It moved almost 0.5% higher against the US dollar during the week.

Income from the UK Government 10 year bondsGilts, known as gilts, fell over the same period, falling as much as 4.481% on Tuesday as investors reacted. Data showing UK public sector debt Last month reached £20.2 billion ($27 billion) – the highest level for any September since records began in 1997.

– Tasmin Lockwood

coming up

October 22: UK inflation data for September
Oct. 23: CBI Business Optimism Index for Q4
October 24: UK retail sales data

– Holly Eliot