Brexit uncertainty has instigated increased volatility in the value of the pound, which foreign investors took advantage of to invest in and purchase high-growth British businesses at attractive prices, Beauhurst data suggests.
2019 saw private businesses securing 481 equity deals, including at least one foreign investor, an increase of 24% since 2018. These investments were worth a combined £9b, more than double the £4.4b raised in 2018.
Although this increase in both the number of deals and the total money invested may partly reflect the increasing amount of capital available globally, it is significant in the context of a 3.7% decline in total deal numbers in the UK since 2017.
If the increase in deals is due to bargain hunting on the part of foreign investors, it is important to recognise that it is also a vote of confidence in the UK as a place to conduct business over the longer term.
Furthermore, foreign direct investment (FDI) in the UK is at a record high. FDI refers to significant investments made by overseas investors in domestic companies.
Not only was FDI at a record high in the UK, it was higher than any other EU country. As it happens, Britain ranked third in the world for inward FDI stock in 2018, only behind the United States and Hong Kong.
The latest UN statistics from 2019 show the value of the equity held by foreign investors at the end of 2018 was at a record high £1.48 trillion.
Nevertheless, the true measure of confidence is whether foreign investors are willing to own UK-headquartered businesses outright. Alas, there was a slight fall in total acquisitions involving a foreign acquirer or fund from 194 deals in 2018 to 175 deals in 2019.
Many of the larger deals were in the financial services, possibly symptomatic of depressed prices due to the uncertainty surrounding European market access post-Brexit. Financial Services acquisitions included money transfer company WorldFirst for a reported $700m (£545m) in February 2019 by China’s Ant Financial.
Overall, the UK continues to be a preferred destination for global capital, and overseas investors continue to hold large amounts of equity in UK firms compared to other EU countries. Recent evidence suggests that Brexit uncertainty has impacted that in a largely positive way.
Nevertheless, since the Brexit withdrawal agreement has now passed and the economic uncertainty begins to subside, the long-term impact of Brexit itself on foreign investment is yet to be seen.