Listening to the news, or reading the papers, the outlook for the UK looks bleak. The Covid-19 pandemic has hit the British economy hard – harder, it would appear, than many other major economies. And the hopes of a trade deal with the EU seem to ebb and flow from week to week.
Against that gloomy backdrop, many will presume that large global investors like Advent will be quietly backing away from the UK and turning their attention elsewhere. But they would be wrong.
We still strongly believe that the UK is, and will remain, a great place to invest and to do business. It’s important to remember that the UK is still the sixth largest economy in the world and will continue to be an important economic player in the years ahead.
At a macro level, Britain has some real, inherent strengths, including a strong, independent legal system, a flexible labour market and a stable system of government. Its position on the global time zone is advantageous too.
There is little doubt that the UK – and London in particular – have become powerful magnets for attracting highly skilled and entrepreneurial people from around the globe. This ready supply of international talent has been a key driving force behind the creation and growth of some fantastic businesses – and hopefully it will continue that way.
The environment in which companies have to operate is pretty favourable too, particularly for innovative start-ups. Firms do not face some of the crazy bureaucracy that can be encountered elsewhere.
These are all important foundation stones for a successful economy – a helpful backdrop. But what makes the UK particularly attractive to global investors like Advent is the extraordinary range and diversity of high-quality, international businesses operating here.
When we are considering investments – we’ve invested £5.5bn of equity in 40 UK companies since 1990 and our largest investment team is based in London – we are always looking for the potential within a company to grow and expand. What makes the UK stand out from many other countries we operate in is the sheer breadth of businesses with the opportunity to move to the next level.
Companies like Worldpay, a leading payments provider. Despite being a market leader, it was underinvested and struggling when Advent, together with Bain Capital, bought it from RBS in 2010 for around £1.7bn. We worked with the existing team, brought in some new management, and invested around £1bn to help it fulfil its potential. Having IPO’d in London in 2015 and then merged with a US payments business called Vantiv (another former Advent portfolio company), last year it was sold to FIS for $34bn (£26bn).
Advent’s recent investment in Hermes, the e-commerce fulfilment business, together with five other investments in UK companies in the last three and a half years, are all examples of how we are putting our money where our mouth is when it comes to backing British business.
There are undoubtedly challenges ahead for the UK. Covid-19 has had a huge impact on economies around the world, including Britain – but hopefully by the second half of next year we will be looking at the pandemic in the rear-view mirror, while acknowledging that many personal tragedies will never be forgotten.
Brexit is a source of uncertainty too. Our view is that it would be preferable for a free trade deal to be struck between London and Brussels and hopefully the two sides will find a mutually acceptable agreement.
The opportunity if we get it right is immense. The UK has an advanced, open, flexible and business-friendly economy – and it boasts an amazing array of high-quality companies and firms to invest in. If the UK continues to focus on encouraging and building innovative, high-growth sectors like digital and cyber, biotech and pharma, the future can be bright.
Despite the sometimes downbeat headlines, we remain convinced that the UK will continue to be a great place to invest and to do business.
James Brocklebank is managing partner and co-head of Europe at Advent