Is the UK still open for business?

June 2021

With air corridors into the UK suspended (at the time of writing) because of Covid-19, and confusion at custom checkpoints, ports and docks resulting from Brexit changes, our international colleagues might be forgiven for thinking that the UK has given up on global trade and collaboration. Nothing could be further from the truth.

UK continues to attract inward investment

In 2019, at the height of Brexit uncertainty, the UK accounted for more private equity deals than the rest of Europe combined. The UK sealed 1,168 deals worth $43.61bn compared with its nearest rival France, with 880 deals worth €8.61bn, and Germany, with 632 deals worth €11.80bn (source: S&P Global).

In 2020 the UK also remained the biggest draw for venture capital investment in Europe, with British companies raising $13.7 billion (source: Pitchbook). Further, five new UK unicorn businesses were created in 2020, more than any other European country. Gousto’s valuation exceeded $1 billion when the meal kit start-up raised £25 million (around $34 million) from existing investors. Another new British unicorn was virtual events start-up Hopin, which raised $125 million in Series B funding in November 2020 at a $2.1 billion valuation. Other notable deals included digital bank Revolut’s $580 million Series D funding, and Amazon’s $575 million investment in Deliveroo.

Mergers and acquisitions – maintaining activity

As for mergers and acquisitions (M&A), despite a difficult year the UK was second only to the USA. Notably, cross-border deals were the only category of global activity that compared to 2019 activity levels (source: Bloomberg). In 2020, there were 3,131 announcements of currently pending or completed cross-border M&A deals valued at $1 million or more, resulting in control of the acquired company or assets, with an aggregate value of $1.06 trillion. This accounted for 39.7% of global M&A activity in 2020, close to the 39.3% market share that cross-border deals produced in 2019.

The top five target countries with the most cross-border M&A deals in 2020 were:

• USA – 652
• UK – 315
• China – 245
• Australia – 150
• Germany – 135

The top five countries by value were:

• USA – $342.4 bn
• UK – $134.6 bn
• Netherlands – $63.3 bn
• Germany – $60.2 bn
• Canada – $38.7 bn

Stable and low-tax environment

The UK regulatory and political environments remain stable and efficient (the World Bank estimates that it takes 13 days to set up a business in the UK compared with an average of 32 days in the rest of Europe). What’s more, the UK’s corporation tax rate of 19% is one of the lowest in Europe, bettered only by the Republic of Ireland at 12.5 %, and Hungary at 9%.

With one of the most flexible labour markets, the UK enjoys personal income tax rates that are lower than its main European rivals. English is the international language of business, while the UK remains one of the easiest countries in which to register a property and has a progressive attitude to planning consent. The UK also enjoys a well-educated talent pool, hosts one of the largest financial services markets, and remains a global leader in innovation.

These are just some of the reasons why London boasts more corporate headquarters than any other capital city in the world. In short, the UK is not just open for business, globally it remains one of the most flexible, innovative, dynamic, and attractive markets.

International trade

Although a difficult journey, the UK’s trade deal with the EU offers its international partners (with few exceptions) unlimited tariff-free access to European markets. Keen to establish its own post-Brexit place in the world, this deal is likely to be one of many free-trade treaties that the UK will complete in 2021.

Despite the calamity of the global pandemic, we can expect the UK to be ready as soon as travel restrictions are lifted and as keen as ever to do business. Further, a new world order that appears to promise a more outward looking USA, a more nuanced approach to China and greater emphasis on the environment will generate huge new growth opportunities and deals.

The need for advice

With the trend towards cross-border deals surviving the struggles of 2020, never has it been more important to understand the secrets of global networking and collaboration. Of equal importance will be the need to seek professional advice and support to help knit together international deals, establish international operations, navigate potential regulatory and taxation pitfalls, and raise capital in the appropriate currency.

As for the UK’s part in the outlook for 2021, this reminds me of a Douglas Adams quote: ‘I may not have gone where I intended to go, but I think I have ended up where I needed to be.'

About the author

Paul Heaven
West Midlands, United Kingdom

Paul is a director at Jerroms, Russell Bedford’s West Midlands, UK member firm. He is a qualified chartered accountant with more than 20 years general management experience and is a member of the Corporate Finance Faculty of the Institute of Chartered Accountants in England and Wales (ICAEW). Paul is an expert in corporate finance, venture capital, private equity and asset lending and has extensive experience of acquisitions, disposals, floatation and fund raising. He personally led a start-up venture that grew (with £9.5m of external investment) to become one of the worlds’ leading vendors in the provision of outsourced, internet based, supply-chain technology. Paul is accredited as a SFEDI Business Support Advisor.

Author: Paul Heaven - Jerroms, West Midlands, United Kingdom

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