In June 2016, 51.9% of the UK public voted to leave the European Union and since then, speculation regarding the impact of Brexit on the UK economy has been rife. This has been the case particularly for the financial services sector, mainly because of the sector’s impact on the British economy and its international influence.
There is no question that uncertainty of any kind affects business activity - it is more difficult to plan, make investment decisions, or forecast further than a few months ahead. However, post-Brexit there should not be too much of an impact on the Corporate Finance industry as a whole, nor on the jobs market. The nature of the market may change in regards to primary operating areas - we may see a move away from M&A due to the uncertainty of the economy and a move towards distressed companies, restructuring, debt and capital advisory. But, we should not expect the structure of private M&A transactions to change significantly as a result of Brexit.
The latest Baker Tilly International research report, Global Dealmakers: Cross-border M&A Outlook 2019, upholds this. 54% of the 150 participating global dealmakers said M&A activity will increase through the rest of 2019 and beyond, with 71% intending to focus on cross-border investments as they seek out new markets. Southeast Asia and North America are among the top investment destinations, although large numbers of respondents intend to remain focused on their home markets which is positive for the UK M&A space. While geopolitical events and economic uncertainty in the UK surrounding Brexit is creating concern, dealmakers are remaining positive on their ability to get deals done and many anticipate an uptick to the ongoing rush of M&A transactions.
The prospect of Britain’s exit from the European Union - especially if it takes place without a negotiated deal - will inevitably have some negative repercussions that affect not just the UK economy but economic stability around the world. At the same time, the concentration of Corporate Finance is not likely to change - what may change is how business sits within its sub-categories. M&A is likely to remain a prosperous market, as will the majority of financial services. London is the financial services capital of the world and going forward this will continue to be the case. In 2018 for example, the financial services sector contributed £132 billion to the UK economy, 6.9% of total economic output and 49% of the sector’s output was generated in London.
In the last six months, we have not seen any notable negative changes in the job market - boutique and accountancy firms have seen little impact so far. In Q1 of 2019, there were 1.1 million financial services jobs in the UK and there will certainly be opportunities within the Corporate Finance market post-Brexit.