The chancellor’s Autumn Statement has set out plans to stabilise the UK economy and reduce inflation, by announcing around £30bn in spending cuts and £24bn in tax rises. The announcement confirms forecasts which predict the economy will shrink by 1.4% next year as the chancellor acknowledges the UK has officially entered recession. A combination of global factors, with emphasis on the war in Ukraine which has prompted soaring energy and food costs have been cited.
CEO/Founder of business advisory firm, Trachet, Claire Trachet – who’s helped to facilitate over $500m worth of transactions in the past three years – states that a weakened sterling, combined with renewed optimism surrounding new PM Rishi Sunak’s ability to manage the nation’s finances, could result in both the deals market and investment remaining strong in the UK. This is due to the fact that as the pound falls against the dollar, British companies become increasingly cheaper for foreign firms to either invest in, or take over. “For US investors, if things continue the way they are going, it could become something like a garage sale – but one with real value,” explains Trachet.
Corporate finance and M&A expert, Claire Trachet, comments on the Autumn statement and its implications on startups, tech and M&A:
“The chancellor’s main objective will be to balance the books and bridge the spending deficit, which stands at approximately £50 billion. However, it is the delivery of this which will determine market stability for the coming months. For the UK’s start-up sector, the Autumn statement should be a reverberation of the mini-budget in terms of the highly anticipated expansions to the Seed Enterprise Investment Schemes (SEIS) and tax relief for angel investors – which has been confirmed by the chancellor will stay afoot. It is also crucial to remember that Rishi Sunak is a major advocate for UK tech as a critical source for job creation and economic growth in his Digital Strategy announcement earlier in the year.
“Inflation, the energy crisis and the interest rate increases will continue to economically affect the UK in the short-mid term. However, British firms will continue to receive interest from a flurry of overseas buyers looking to capitalise on a weaker pound and deteriorating valuations. This has its positives and negatives, as on the one side it will attract a great deal of foreign investment to the UK, alongside tax incentives and favourable regulatory conditions. However, low valuations mean UK companies entering potential M&As may get less than they bargain for, so it is a critical moment for the sector here to show resilience.
“I always stress to my clients the importance of being deal ready before heading into any potential transaction. The buyer has shown an interest in your firm at a particular moment in time, but a simple change in external market conditions could lead to them getting cold feet and pulling out. What that means is you need to have done all the necessary preparation before negotiations have started, to ensure the deal gets over the line quickly and smoothly and a failed transaction doesn’t impact the company’s valuation.
“This has never been more important than in the current deals market where the environment can dramatically change over the course of just a few weeks. Another really important thing here is to both sign and close the deal at the same time, as this prevents anything putting the deal in jeopardy in between those two things happening.”
