Britain has lost its place as one of the world’s top investment destinations in the wake of the Brexit vote, according to a survey of 1,700 leading business executives. The UK has fallen to seventh on the list, the first time it has failed to make the top five.
“Brexit is a prominent example of the rise of geopolitical changes that are adding complexity to cross-border investments,” Steve Kouskos of EY said, adding that the volatility of exchange rates also dampened deals. The pound has lost almost a fifth of its value against the dollar since the June vote.
The value of mergers and acquisitions involving UK companies has dropped by more than half this year, but EY said it expects this to pick up.
“In the longer term, we would expect the UK to bounce back as a top M&A destination of choice, but the short-term uncertainty is giving investors pause for thought,“ Kouskos said. “Political uncertainty is an impediment not a barrier to M&A.
“The UK remains a formidable economy with great talent, great assets and a long history of innovation and success”.
The survey of 1,700 executives in 45 countries 57 per cent of companies expect to pursue deals in the next 12 months, up from 50 per cent in April.
EY said this was because takeovers are seen as a quick way to generate growth in a low-growth world economy.
Almost half of companies have more than five deals in the pipeline and the majority are seeking deals in the $250 million and $1 billion range. Blockbuster takeovers such as SoftBank’s £24 billion takeover of ARM are likely to be thin on the ground as firms pursue smaller, “smarter” acquisitions, the report said.
The news comes as it was revealed today that the Government is considering paying billions to retain access to the single market for financial services.
