Investors eyeing post-Brexit opportunities in UK

Survey of investors shows confidence that PM May's Brexit withdrawl agreement and investment industry's skills base mean that sector will continue to grow and even bring in new companies.

Investors in London
International investors are expecting to increase their presence in the UK once the Brexit dust has settled, according to a survey by financial services company State Street.

Banks, funds and investors look to open offices in London after Brexit

The firm's quarterly Brexometer survey of 100 hedge funds and private equity companies found that a quarter believed there would be an increase in the number of European-based fund managers opening offices in the UK after the nation leaves the EU.Additionally, 55 per cent of investors believed that the UK authorities would make it more appealing to open offices in London in the aftermath of Brexit, currently scheduled for March 29 next year.State Street said that more than one third of investors also considered there would be an increase in merger and acquisition activity by European fund managers looking to grow and acquire UK-based firms post-Brexit.However, the number of investors intending to increase their holdings of UK assets, which reached a record high of 21 per cent in Q3, fell back to 15 per cent in the last quarter of the year.
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Cautious opportimism in managed withdrawl with May's draft agreement

“Despite the political theatre and the potential tail risk of a disruptive Brexit, we believe that the chances of the UK entering a multi-year transition period in 2019 remains high,” said Bill Street, head of investments for EMEA at State Street Global Advisors.“Similar to conventional electoral dynamics, there is a quasi-incumbency advantage to approving the current draft agreement, given the absence of a plausible alternative. An eventual agreement on the withdrawal should therefore deliver a sentiment boost to UK assets as well as free up investment in the real economy that is currently held back due to uncertainty.“Movements in sterling will continue to be dominated by Brexit news. It remains considerably undervalued reflecting future uncertainties, rallying on news of more positive negotiations before falling back whenever the risks of “no deal” appear higher.”

Despite Brexit UK's finance sector skills holds confidence

While the survey found that, at present, there was a negative outlook for the UK fund management sector, State Street said it also indicated that many foreign investors still wanted to take advantage of the concentration of investment management expertise within the country.Brian Allis, the head of State Street's Global Services EMEA product team, said, "Despite the headwinds and complexity that Brexit is causing, the UK is still a hub for a tremendous amount of investment management expertise, and an attractive centre for fund management activity in Europe."It is reassuring to see that, however negative the outlook for the UK fund industry may be right now, investors still want to maintain and grow their presence locally."Michael Metcalfe, head of global macro strategy at State Street Global Markets, added, “This quarter’s Brexometer was conducted in the first week of November, a period when, in theory, hopes of a deal were on the rise.“Given that context, it is telling that there was little shift in investor attitudes toward their UK asset holdings. Such caution has been vindicated as November has progressed and while significant Brexit hurdles have been cleared, the UK parliamentary vote, which is perhaps the largest challenge to agreeing the deal, now looms large.”

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