UK’s greatest loss from Brexit could be its reputation

Whatever the resolution of the UK’s attempts to leave the European Union, it will likely take a long time for it to repair its reputation among investors.

  • By Sam Kerr
  • 29 Jan 2019
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Equity investors have a habit — anachronistically perhaps — of dividing countries into those that are politically sensible and those that are not when pondering where to allocate capital.

The UK seems to have slipped into the latter category meaning investors will demand larger discounts to invest in the country and sometimes not will not participate in its deals at all.  

It seems like a long time ago but London was once the undisputed capital of European finance and its stock exchange was perhaps the most prestigious in the world.

The UK has also historically been the largest generator of fees and issuance volume in EMEA equity capital markets.

Not only does it traditionally host large, and sometimes historic, IPOs, it also often generates the greatest volume of mid-cap deals in Europe and hosts listings from emerging market issuers looking to tap the international funds based in London.

In short, before the Brexit vote in 2016 the UK was Europe’s equity market gold standard with the additional bonus of strong post-crisis economic fundamentals which meant it was one of the best growth performers among the G7 nations.

Brexit though has destroyed much of the confidence equity investors used to have in the UK. The self-serving grandstanding of the country’s politicians while the Brexit clock ticks down has effectively hamstrung UK IPO issuance since the autumn and companies are now postponing deals because they can’t get enough investors to participate.

On Tuesday, the £200m listing of Global Sustainability Trust was postponed after the sellers were unable to attract enough buyers to invest in the fund, which was designed to make private investments with a positive environmental or social impact.

While equity markets have been choppy since October, with IPOs often delayed due to valuation differences between investors and sellers, fund IPOs are different.

In the case of Global Sustainability Trust, the shares were being sold at a fixed price of £1, and the vehicle simply had to get enough investor participation to launch the fund.  

These kinds of deals are rarely postponed and the fact that one which was selling such an vogueish opportunity, to invest in private market sustainable investments, had to delay, shows how little love investors feel towards the UK.

Investors and bankers are becoming increasingly frustrated with both the UK government, and parliament, which they see as bungling perhaps the most important negotiation the UK has conducted since the end of the Second World War.

On Tuesday night prime minister Theresa May is set to whip her own MPs to vote against the Irish border backstop enshrined in the UK’s EU withdrawal agreement.

This measure is one that has been carefully negotiated between the two parties, and was in fact originally devised by May’s own government in December 2017 in order to prevent a hard border in between Northern Ireland and the Republic.

The EU has frequently said that the withdrawal agreement, including the backstop, cannot be negotiated and as such the prime minister is encouraging her MPs send her back to Brussels to negotiate a position that the EU will not agree to, by removing a mechanism she invented.

With the UK risking an EU exit with no deal with the bloc in place at all - which the government itself has forecasted will be catastrophic - it is little wonder that the UK’s reputation among the international equity investors is shot.

The big question is what it will take to win it back.

  • By Sam Kerr
  • 29 Jan 2019

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 292,949.42 1319 8.57%
2 Citi 265,535.93 1117 7.77%
3 Bank of America Merrill Lynch 227,284.63 931 6.65%
4 Barclays 209,745.10 848 6.14%
5 Goldman Sachs 168,889.20 700 4.94%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 BNP Paribas 34,500.40 147 7.60%
2 Credit Agricole CIB 33,214.96 138 7.32%
3 JPMorgan 24,833.56 67 5.47%
4 Bank of America Merrill Lynch 23,368.44 65 5.15%
5 SG Corporate & Investment Banking 22,509.71 104 4.96%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 9,157.42 55 10.33%
2 Morgan Stanley 8,122.33 40 9.16%
3 Goldman Sachs 7,432.91 40 8.38%
4 Citi 6,426.54 47 7.25%
5 UBS 4,913.18 26 5.54%