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Mar 4, 2019

Europeans double UK investment since Brexit vote

Tim Wallace 3 March 2019 



pound
The pound's fall has made investing in UK companies cheaper for foreign buyers
European investors are taking major bets on the UK economy, more than doubling investment in Britain over the past three years.
Uncertainty around Brexit has not stopped companies on the continent from embarking on a major deal spree in the UK, indicating faith in the economy’s long-term prospects among foreign money managers.
Buyers in the EU have snapped up 553 UK assets through mergers and acquisitions and private placements in the past year, according to S&P Capital IQ data.
Purchases of companies, property and stakes in fast-growing firms totalled $31.1bn over the past 12 months.
That is up from $21.2bn over 497 purchases in the previous 12 months, and $13.6bn on 454 transactions in the same period of 2016-17, the year encompassing the Brexit vote.
The weaker pound and the relatively poor performance of UK stocks since the referendum triggered fears that international investors would be cautious about investing in Britain.
But the numbers suggest those with a longer-term outlook have seen it as an opportunity.
“Brexit risk is likely to have impacted the price of certain UK assets, making them potentially more attractive. If you couple that with foreign exchange movements it makes them cheaper in real terms and foreign exchange terms,” said Spencer Baylin at Clifford Chance.
“Beyond pure pricing, investors also have to take a view on the performance of those assets in a post-Brexit environment. Some will take the long view and invest, others will wait and see.”
Companies and assets serving a British customer base will be particularly attractive, Baylin said, while those with exposure to the EU may be less favoured as the terms of future trade across the Channel are not yet known.
At the same time investors are trying to put their money to work in a world of very low interest rates, so remain keen to back real assets and can take risks to get a good return.
“There is an enormous amount of uninvested capital in the private equity world. Generally if they don’t spend the money they lose it and the fees associated with it. They have been very successful at raising money, so the pressure is on to deploy it,” said Rob Donaldson at RSM.
He added that as well as the weaker pound making UK assets cheaper, prices in the US have become very expensive, giving a further competitive edge.
“We’ve seen some very significant property deals dome, with the Gherkin and some other very large assets acquired by overseas investors taking the long view,” said Mr Donaldson.
It comes after the Norwegian sovereign wealth fund said it plans to increase its investments in Britain over time. At the same time the top 10 investors in Britain, including Vanguard, Invesco, Schroders and Legal and general have all increased their holdings of UK securities in the past three years.
“A lot of Europe has been at or near recession. There haven’t been as good opportunities to invest in Europe as there have been in the UK, which has been performing well,” said Nick George at PwC.
“Interest rates have been very low so people have had to invest rather than putting it into banks or government bonds. The eurozone hasn’t necessarily been [an] obvious [choice].”

Source: The Telegraph

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