Blog - Effect of Brexit on business sales now and in the future
Thursday, 22 December 2016
Following the Brexit vote, which came as a shock to many politicians and poll analysts, it is interesting to see what impact it had in the business world.
At the time of writing, the value of businesses in the FTSE 100 have increased by 11.1%and in the FTSE 250 by 5.2%since the Brexit vote, although confidence in the manufacturing sector is said to be reducing.
Having said that, with sterling falling by around 18%from 1.50 to 1.23 £ per US$ it has given UK exports a boost but admittedly makes many of our imported goods and raw materials more expensive.
This, together with a raft of strong economic data published since the vote, has persuaded some analysts that a devastating economic crunch – predicted by then-chancellor George Osborne – is unlikely to strike the UK in the short term. City economists now believe the UK will grow by an average of 1.6%this year and 0.7%in 2017, according to the Treasury’s recent study of forecasts.
The economy is still there, it just looks a little different and as always there will be winners and losers, the future is yours/ours to create. Yes there is uncertainty, but when has there not been?
So, is it a good time to sell or buy a business?
The answer will depend upon your personal/business drivers and the industry you are in, but in general the answer is no different than before Brexit. One could argue that it is preferable to sell now whilst we are still part of the EU as trading conditions ought to be relatively known compared to the longer term post-exit scenario. In addition, the current weakness of the pound means overseas buyers, particularly from the US, are likely to be more active than ever before in acquiring UK businesses.
The trick, as always, is to spot the opportunities and mitigate the risks. As every scenario will be influenced by both factors, it is wise to take professional advice, particularly during these times of heightened political and economic uncertainty.
MHA Larking Gowen Corporate Finance