M&A activity suggests there is confidence in the UK’s future
Mergers and acquisitions (M&A) collapsed globally in 2020, reflecting the impact of COVID-19. However, despite the widespread pessimism about the UK economy, there is no shortage of M&A interest in UK companies.
We have seen takeover interest in large, quoted companies such as Sky and the LSE, alongside numerous transactions in the well-established successful mid-cap UK sector. Prior to the COVID-19 crisis, the EY Global Capital Confidence Barometer had the UK as the number one spot in terms of investment destinations for the first time in the survey’s 10-year history.
Why? Because with sterling under pressure, UK companies look like good value. Executives can see through Brexit to a UK economy that will ‘revert to norm’, as it were, and continue to be a strong and stable place to do business when the questions around the UK’s relationship with the EU are resolved.
UK remains an easy place to do business
As a leading banker and adviser to business owners and entrepreneurs in the UK, we talk to many clients about their experience doing business in the UK and overseas. Our clients, resoundingly, tell us that the UK is one of the most straightforward countries to operate in.
Encouragingly, this anecdotal evidence is backed up by independent research via the World Bank’s comprehensive study, Doing Business. This is an annual survey of the ease of doing business based on detailed analysis of 190 countries. Relevant contributions to an overall score include:
- Starting a business
- Dealing with construction permits
- Getting electricity
- Protecting minority investors
- Paying taxes
The UK ranks eighth out of all countries surveyed, with consistently favourable scores across multiple categories. In contrast, France and Italy, despite being home to many world-class businesses, rank at 32 and 58 respectively.
Is this another measure of a race to the bottom in terms of unregulated capitalism? Encouragingly the UK and other higher-ranking countries also score well in tackling corruption. Transparency International ranks the UK as 12th out of 180 countries in terms of their Corruption Perception Index.
Finally, which country ranks at the very top of the world, in terms of both ease of doing business and the Corruption Perception Index ? Again, New Zealand. This shows that these policies have widespread and broad political appeal across the traditional left and right spectrum.
Despite the expected, short-term difficulties based on either a no deal or even a “last minute” deal on Brexit, the longer-term position of the UK looks assured. The UK has favourable incentives for both employers and employees and is one the easiest places in the world for doing business.
However, just like the British Lions on the rugby field, don’t expect the UK to surpass the number one slot of New Zealand any time soon.