This week’s Brexit vote has been eavily criticised by organisations attempting to keep SME’s viable in the current volatile political and economic climate. Both the UK Business Angel Association and the EISA have come forward to comment on the effects of the Brexit stalemate on their client’s businesses.

Both associations work in the sphere of small business investment, specialising in alternative finance routes for SMEs. They are perfectly placed to discuss the impact the result could have on small business and investment in the UK as well as wider business topics.

Jenny Tooth, CEO of the UK Business Angel Association said: “There is no greater community affected by yesterday’s vote failure than those that live, work and trade in Britain’s regions. With a hugely significant level of funding being ripped from local government grants and various other EU funding pots, an overwhelming degree of financial and infrastructure related support is required to ensure that our flourishing global cities across the UK, in addition to towns in the Midlands and the North, continue to create an environment for new technology and businesses to grow.”

Mark Brownridge, Director General of EISA said: “Uncertainty breeds fear and that’s what we will see more of with the agreement not passing the Commons. How can any business plan with the political backdrop we are currently experiencing? It’s madness. We will now almost certainly see a slow-down in the economy that could have been easily avoided.

“If the markets and the economy know what the issues are, they react and solutions are put in place to counter them, but with the current Brexit calamity all bets are off. We are entering uncharted waters and anyone who tells you they know how this will play it is lying.

“The hope is that Brexit creates an opportunity for SMEs as they can be nimble and manoeuvre quicker than bigger companies which may give them an advantage. One thing is for sure, we are going to need them more than ever to provide the UK economy with the growth and positive effect that we are likely to miss out on due to the Brexit process.”

Mergermarket, the provider of M&A data and intelligence, has found that in Q4 2018, UK M&A reached £27.9bn, dropping to its lowest quarterly level since the EU referendum as the uncertainty surrounding Brexit appeared to cause companies to halt investment.

The final three months of the year fell a considerable 19.9% when compared to that seen in the third quarter and became even starker when pitted against figures generated earlier in the year.

Jonathan Klonowski, Research Editor (EMEA) at Mergermarket said: “The unrelenting uncertainty surrounding the future direction of the UK and the looming threat of no deal has led to a pause in investment in recent months. Further subdued activity can be expected in the opening months of 2019, as long as the lack of clarity persists.”

Overall, M&A targeting the UK reached £182.6bn in 2018, 26.3% higher than a year prior as a result of high-profile deals announced in the first half of the year (such as Comcast/Sky and Sainsbury’s/Asda). Inbound M&A was largely driven by US investment, which reached its highest point on Mergermarket record with enough investors undeterred into making high-profile investments earlier in the year.

Meanwhile, domestic M&A reached its highest value (£61.bn) since the financial crisis as firms looked towards defensive consolidation to mitigate the effects of political uncertainty. With concerns over how sectors such as retail will adapt, further such deals are expected in 2019, according to Mergermarket intelligence.

 

Brexit has also begun hurting private equity investment, following a patch of strong activity, according to Mergermarket. Despite private equity activity surging elsewhere in Europe, UK buyouts saw subdued activity in 2018 dipping 11.6% to £28.4bn, with private equity investors appearing to be unwilling to spend vast amounts in such uncertainty. While other European countries saw private equity investment boom in 2018, the UK experienced somewhat subdued activity as dealmakers battled political headwinds. With the UK traditionally experiencing multiples higher than its European counterparts, it appears that some private equity investors are unwilling to spend vast amounts in such uncertainty.

by Bill Boyle
IBS Intelligence Senior Editor
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