The eyes of foreign investors are now on the UK, following the shock decision to leave the European Union (EU), with assets, including real estate and company acquisitions, on their radars.
Many analysts speculated that by leaving the EU, the UK pound would take a battering.
So far the sterling has not disappointed, falling to 31 year lows against the US dollar, which has encouraged investors.
Julien Jarmoszko, Standard and Poor’s equity manager from their global market intelligence division, reflected, “It depends on the returns on which assets investors most desire. We have seen Japan‘s SoftBank buy Arm Holdings in the technology sector. In property, Madison International has spent £1 billion on UK real estate, mostly in London, an attractive proposition. We have not seen industrial companies or exporters purchased yet, as it’s difficult to know what will happen with the UK and the EU single market.”
Another major deal involved the UK discount chain Poundland, which was taken over by South Africa’s retail group Steinhoff international, where both parties signed a £597 million agreement.
“Investment banks are very active in conducting the deals, and there are a large amount of small intermediaries for smaller deals,” he added.
“The sterling outlook is an obstacle even if you may invest at a lower price, you need an exit plan and cash flow has to be ongoing. If you are investing in exports into Europe or in Canary Wharf, and if EU financial passport rights are lost, then companies may move. That results in surrounding amenities not being used, and valuations are lost. The number of transactions is slowly needing more clarity.”
Looking to the future, investors will need to look at their profile, ‘Brexit’ uncertainly increases risks of investment, but opportunities are there for higher returns, for example in asset prices.
“The UK has been open for business for a long time. You have the City of London, infrastructure is there for foreign capital, the UK is still seen as a favourable place to invest, and stable compared to many countries,” Jarmoszko opined.
Research from financial intelligence company Preqin revealed a mixed response from financial institutions in a report compiled after ‘Brexit’, with some investors saying that they craved more certainty in the UK.
Fund managers were asked what they thought the impact of Brexit would be over the next year. Hedge funds were the most optimistic, as 21% of fund managers said that they would make more investments.
Whereas only 3% of private capital fund chiefs said that the UK would now be a more appealing investment proposition. From the alternative asset class, 14% of those questioned said that they would place more of their portfolio in Britain.
Private Capital fund managers also said that they are more likely to pull away from the UK, due to lack of confidence in the country since ‘Brexit’.
Overall 32% said that would make fewer investments in the UK. They were followed by 27% of alternative asset managers and 23% of hedge fund managers who said that other countries would now be a safer bet.