Attracted by favourable exchange rates, US corporations have been eyeing up Britain’s top companies as EU buyers have lost interest. Ecovis Wingrave Yeats’ Managing Partner Gerry Collins believes this demonstrates the confidence that US bosses have in the UK’s economy and its innovative businesses.
The value of the pound has had a succession of serious falls since the UK began preparing to leave the EU after the referendum in 2016. This has resulted in the collapse of many high-street retailers and restaurants due to the difficulty of importing materials, as well as cheap labour.
The weakened currency has led to good news elsewhere however, as the UK’s media and entertainment sector have received a boost by almost £10 billion year-on-year. The real estate and luxury property markets have also benefitted from heavy investment as £5 billion in Chinese capital was spent in London alone in the first half of 2017. Despite an uncertain future, the falling pound has made the UK an attractive investment due to its strong presence as a top global financial centre.
Shazam, a fast-growing, UK-based music app was one of the first businesses recently snapped up by Apple for £299 million. Other firms have followed suit, acquired by US companies at bargain prices thanks to the cheap pound as the UK and EU continue to fail at securing a deal during the negotiations, leading to the risk of the UK leaving with no deal in place by March 2019. Inbound investment specialist Gerry believes this is unlikely to happen however, as it is not in the interests of either party for the UK to leave without a deal.
In addition, US insurance broker Marsh & McLennan’s plan to buy Jardine Lloyd Thompson, a UK insurance company, in a £4.3 billion deal has driven a rise in merger and acquisition figures for 2018 following Coca-Cola’s £3.9 billion plan to purchase Whitbread’s Costa Coffee chains. Unlike their European counterparts, US firms seem to be largely ignoring Brexit concerns and increasing their investments in the UK. The value of deals involving UK businesses being bought out by US companies more than doubled to £79 billion in 2017-18 from £36.8 billion in the previous year. Deals from EU companies for UK businesses on the other hand fell from £14.1 billion to £13.3 billion, a 5% fall in the last 12 months.
Commenting on these rising figures, Gerry Collins says that “This increase in acquisitions is clearly linked to British businesses being comparatively cheaper than many of their foreign competitors, due in no small part to the recent devaluation of sterling. US businesses, buoyed by the uprising in the US economy have significant funds to acquire European businesses. The UK is seen as a first port of call by reason of more favourable time zones, language, and looser employment legislation than in mainland Europe”.