Recent research from the government’s Digital Economy Council indicates that UK tech companies have secured a record £5.5bn in foreign investment in the first seven months of this year, with US and Asian firms having invested the most. This is 50% more than in the same period last year.
The figure comes while overall foreign investment in the UK has fallen since the Brexit referendum and hit a six-year low last June, according to the Department for International Trade.
Impact on Businesses and Law firms
The weaker pound has likely contributed to this figure, as it makes UK companies more affordable for overseas investors whose buying power is boosted by their stronger currencies. Moreover, the UK has a long-standing reputation for innovation, and an investment in UK tech firms arguably enables Asian investors to hedge against the trade war with the US.
Overall, this should mean increased activity for law firms’ corporate departments and, since US and Asian investors have together invested £3.02bn of the total £5.5bn, global law firms with an established relationship with US and Asian clients should be ideally positioned. However, lawyers must watch the UK’s plan, first proposed in October 2017, to expand its foreign investment screening regime and give the government more scope for intervention in transactions. More interventionist merger control policies would increase execution risks and make transactions involving foreign investment more costly for clients.
Finally, concerns remain about the impact Brexit will have on the UK high-tech industry, not least because one in five tech workers in London is from the EU. Lawyers currently drafting contracts for foreign investors and UK companies must therefore consider the extent to which any proposed target companies are exposed to political and economic upheavals, and draft clauses to mitigate risks for both parties.
By Elise Lanteri