The lead-up to the election had a visible impact on business including the mergers and acquisitions market but with the Conservatives now in power and investor jitters settled, the future for business leaders looks bright, writes Kevin Uphill, chairman of Avondale
Despite the odds being stacked against them, the Conservatives won the general election with a small, but clear majority. The uncertainty of which would be the winning party or indeed parties, possibly resulting in another coalition government, caused anxiety in the UK and internationally.
Investors revel in security and many acquirers sat on the fence, waiting to see the outcome. This resulted in a visible drop in transactions. Wise acquirers would have used the time to research and identify suitable targets.
The Conservatives’ win has certainly been bolstered by UK business. Ten days before the election, a letter signed by over 5,000 small business leaders, employing around 100,000 people was published in support of the Conservatives, stating that they would “like to see David Cameron and George Osborne given the chance to finish what they have started” and that “a change now would be far too risky”. That now seems to be an opinion shared by the masses.
David Cameron has appointed Sajid Javid as secretary of state for business, which with an impressive list of credentials – both in business and politics – is a move welcomed by many commercial leaders.
One of the key areas for the Conservatives is the European Union referendum. When the UK joined the EU it was widely based on the benefits of a trade agreement rather than the restrictions of an international welfare state.
The referendum gives the government real leverage, a proper strategy to renegotiate a contract. While trade within the EU is attractive, the UK has the ability to trade successfully with other international parties including Asia and South America.
The EU will have to look at concessions if they are to retain the UK’s membership. Javid will play a critical role in the upcoming EU referendum and has stated that leaving the EU “isn’t something that I’d be afraid of, I’d embrace the opportunities that would create”.
He has, however, said that the “best outcome is if we do have a renegotiated relationship… In my 20 years in business I’ve worked around the world, I think we are already a global player, an international country when it comes to business. I want that to happen inside the EU and we can reform it and focus it on trade and ensure it is not insular looking. We can all be better off inside the EU if it can change some of its ways”.
Business tax is also key to the Conservatives and was during their recent term in the coalition government. They believe that the tax system can and should be an asset for the UK, improving the business environment and helping to attract multinational businesses and investment.
It is widely believed that they will maintain, if not further reduce, corporation tax, which already decreased from 28 per cent in 2010 to 20 per cent by 2015 – the joint-lowest level in the G20. The previous coalition government increased the lifetime limit of entrepreneurs’ relief from £2m to £10m meaning that, if applicable, you get taxed at 10 per cent if you sell all or part of a business, rather than at the normal, substantially higher rates. This increased cap makes investment in the UK an attractive prospect for serial entrepreneurs who want to grow, sell and buy – and provides obvious benefit for those simply exiting.
With the Conservatives in power and investor jitters settled, the future for business leaders looks bright. The EU referendum will cause interesting times but is seen widely as a negotiating tool to benefit UK business. Overseas and domestic investment in the UK is set to flourish. This will undoubtedly see M&A activity accelerating apace.
IoD members can access discounts from Avondale, the IoD’s preferred provider of business sales, mergers and acquisition services. To find out how Avondale can help you call 01737 234892, email Avondale or visit iod.com/buyandsell
Avondale will also be sponsoring the IoD’s buying and selling private companies conference on 17 November at 116 Pall Mall, providing advice and guidance on buying and selling a private business