The Post-Brexit Mega Deals Opening The UK For Business
As the Brexit fallout clears from UK politics a new reality has set in. The new Prime Minister, Theresa May, has made it clear that the UK is still open for business. As if to emphasise that fact, only days after her official appointment, one of the UK’s largest and swiftest deals has been announced, demonstrating how the UK has maintained its attractiveness for investment from overseas companies.
Amid the political furore and cabinet appointments in recent weeks, overseas investors have been quietly and calmly going about their business, seemingly unperturbed by the UK’s decision to leave the EU. In fact, the new Chancellor of the Exchequer, Phillip Hammond, on being asked about the biggest post-Brexit deal, between ARM Holdings and Softbank, said that it shows that, “Britain has lost none of its allure to international investors”.
The deal which was announced on 18th July, sees Softbank, one of the world’s largest technology companies, pay £24bn for the UK technology firm ARM Holdings and belies fears that the UK would become isolationist in its outlook towards the rest of the world. ARM, based in Cambridge’s Silicon Fen, was founded in 1990 and employs over 3,000 people. It designs microprocessors for use in Apple and Samsung smartphones and last year saw 15 billion chips containing its technology manufactured – over half of these were used in mobile devices, the rest were in network equipment and the Internet of Things, which Softbank is keen to focus on.
Taking just two weeks to complete, the deal was warmly welcomed by the UK Government. A spokesperson for the prime minister said, “The announcement of investment… from Softbank into ARM Holdings is clearly a vote of confidence in Britain”. A post-Brexit landscape of a weakening pound was inevitably going to attract increased inbound mergers and acquisitions and make investment attractive to overseas investors. However, despite the drop in the value of Sterling, the deal cannot be seen as a post-Brexit bonanza for Softbank due to ARM’s shares gaining over 16 per cent in the past month due to revenuing in dollars.
The UK government has expressed concern that foreign investment in the country’s industry and businesses may tail off due to the vote to leave. This would have impacted on the country’s deficit. However, the capital investment which Softbank alone has made is so large that it covers the coming three months of deficit payments. Furthermore, rules on foreign investment in UK companies are still subject to the same scrutiny as pre-Brexit, despite warnings from the new prime minister that future deals would be investigated according to the national interest and as part of a ‘proper industrial strategy’. This currently includes defence, media and financial services but may be extended to sectors such as pharmaceuticals.
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