Andy jalil –
Despite a slowdown in UK growth, the vast majority of global financial services bosses believe London with it’s influential financial district, will remain at the pinnacle of the European industry after exiting the European Union.
Some 88 per cent of the more than 100 senior leaders surveyed by Lloyds Bank in recent data published said that they believed the UK will remain the most prominent hub for financial services in the EU even after Britain leaves the bloc.
Bosses are wary of the UK’s sluggish growth yet expect the economy to battle on. “Our survey suggests that the UK economy will prove to be resilient and that it will come through the challenges of the next few months relatively unscathed,” said Robina Barker Bennett from Lloyds.”
She added that there is “an unmistakable confidence” that the ‘City’ (financial district) will retain its position as Europe’s top financial hub.
Policy chair at the City of London Corporation, Catherine McGuinness, said the research “reaffirms the UK’s position as a preeminent global financial hub — Brexit or otherwise”. However, she added that continued uncertainty over future plans “highlights the urgent need to secure an agreement on future trade arrangements based on mutual market access.”
Meanwhile, City of London lord mayor Charles Bowman said that any Brexit job losses will be more offset by innovation in the capital’s fintech sector. He said: “We are creating something and stolen a march on global competition.”
Furthermore, a flurry of inbound deals is good news for Britain. It will please bankers that deal-making this year has jumped to levels close to a pre-credit-crunch peak reached more than a decade ago. That’s according to figures published this week by accountancy giant EY (Ernst Young).
Both domestic deals and those led by foreign buyers looking for UK targets increased, with the latter leading the way.
US investors topped the list of foreign acquirers buying UK firms, followed by France, Switzerland, Japan and Netherlands. Steve Ivermee, from EY said: “Looking ahead we can expect an equally strong second quarter as businesses look to lock in more favourable financing prior to any interest rate increases.”
Mergers and acquisitions (M&A) involving UK parties totalled a whopping $120 billion (£85bn) in the first quarter of this year, eclipsing the £51 billion recorded in the final three months of last year. In addition, the City’s pipeline for initial public offering also looks strong. The long-term health of the UK capital-raising depends on a constant stream of listings that may not be blockbuster but, combined, form the lifeblood of the London market.
However, such an outlook depends on a relatively benign political environment. The aforementioned data from EY shows an exceptional spike in inbound M&A; in other words, UK assets being snapped up by foreign buyers.
The value of inbound transactions soared from $11 billion in the final quarter of 2017 to $67 billion at the start of the current year. Ivermee, explains: “The significant increase in inbound transactions in likely to lead to a new environment for M&A and dealmakers.”
He adds: “Some of these deals are likely to face increased scrutiny by regulators, government and the public about their purpose, which will need to extend beyond cost savings.” Ivermee advises dealmakers thus: “Articulating this narrative in a compelling way to ensure all stakeholders are onside will become increasingly key to help ensure deals are done.”
Many in the business world look at the furore surrounding Melrose’s attempted takeover GKN — a deal between two UK companies —and fear that a Theresa May-led government could start to take a more interventionist approach to M&A.
It can be argued that the UK cannot remain ‘open for business’ and simultaneously ramp up barriers to investors. M&A may be good for bankers, but it is also in the interests of the whole economy to allow the allocation of capital to be determined by the owners of that capital —whichever way it is travelling.
“The biggest M&A story of 2018 will be the continuing era of portfolio transformation. Companies will continue to reshape themselves and acquire technology and digital assets,” said Ivermee.
The extent of inbound M&A, nearly two years after the referendum, is a positive sign for the attractiveness of post-Brexit Britain. The last thing the country needs is political opposition getting in its way.