With the divorce negotiations now in progress, the UK’s business community has made it clear that it should be at the centre of the decision-making process. In the post-election political reality, the government will have less room for manoeuvre and may be forced to adopt a more collaborative stance, which is likely to result in a move away from the ‘hard Brexit’ route outlined by the Prime Minister only in January 2017. The business community has also been assured that by the time the two years run out, there will be a transitional agreement in place to mitigate uncertainty and avoid a ‘cliff edge’ point.
But uncertainty has undoubtedly been central to how the businesses have responded to Brexit. This transpired clearly from discussions held during two Brexit roundtables held by our firm and involving representatives from various industries, including financial services and manufacturing. A recent survey by Deloitte has also confirmed that 85% of CFOs involved assessed the level of uncertainty in Q1 2017 as high, with 74% indicating that risk appetite remained low.
A ‘wait and see’ approach to strategic decisions has impacted the UK’s M&A market with the overall volume of deals decreasing in Q1 2017. Interestingly, however, the value of the deals increased in a year on year comparison. This can be attributed in part to a few large deals involving foreign investment into the UK, encouraged by the dip in the value of the Sterling. With so many variables in play at this stage, it is impossible to predict the long term effect of Brexit on cross-border M&A activity but a move away from the EU merger control legislation may result in increased government intervention in deals involving foreign investment. The final picture, just as the UK’s relationship with the EU, will emerge gradually as the negotiations progress.
Despite the uncertainty, we see in our clients a strong will to move forward, which is aligned with the statements of business community leaders. There is, however, no room for complacency and industry collaborations, investment in training and development, excellent client care and looking for business beyond the familiar territory have never been more important to the successful navigation of a political storm.
Laurence Gavin – Partner
Anna Ai – Trainee Solicitor
Published: 18 July 2017
Summer 2017
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