On passports to protectionism

You could see this week’s ‘blue passports’ furore coming a mile off.

Back in October 2016, when HM Passport Office first engaged the market about the new £490m passport production contract, I predicted – in a note to clients – “howls of nationalistic protest should a French or German competitor win this iconic British contract from a British supplier”.

And so it came to pass, as De La Rue apparently lost out to Gemalto on the straightforward cost and quality grounds that will be familiar to seasoned bidders on UK public sector contracts.

Without seeing bid details it’s impossible to say why De La Rue’s was – reportedly – so much less competitive. But modern passport production is all about embedded security features, not printing, and the claim to market leadership there is held by Franco-German companies Gemalto, Oberthur and Giesecke & Devrient. (De La Rue sold its smart cards business to Oberthur back in 1999 – who knows what would have happened had the company retained and invested in it?).

I also warned that EU procurement rules could become a fresh political battleground in the UK – and this too has come to pass. De La Rue has taken to the TV studios threatening legal challenge with feisty nationalistic rhetoric, and politicians of all stripes have leapt to pour scorn on public procurement rules.

So will passports be a storm in a British teacup, or the straw that broke OJEU’s back? Culture Secretary Matt Hancock has noted procurement policy was up for debate post-Brexit. But it’s hard to imagine government appetite for more than superficial change, given the UK’s leading and enthusiastic role over decades in shaping the EU’s open-competition regime which UK companies have benefitted from. Most likely ministers will try to ride out the storm.

But with protectionism now ‘a thing’ in the UK as well as the US, this won’t be the only controversial contract award the British government will make. The temptations for UK-headquartered companies to indulge in a bit of posturing, should they fail to win government contracts, are obvious.

I’d warn all tech firms to think very carefully indeed before following De La Rue’s example. Protectionism is a zero sum game, and it eventually catches up with companies who themselves wish to compete globally. And in the UK, where public contracting is already racked with drama, it could mean that future sensitive contracts are not put out to open competition at all. 

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