According to the latest EY study, following Britain’s decision to leave the European Union, Germany has been identified as the top destination by global investors with operations in the U.K. looking to relocate.
Companies planning to change or relocate some of their European operations in the next three years should the U.K. leave the single market amounted to 14 percent of foreign investors with a presence in the U.K. according to the study as Brexit has caused global investors to reassess their assets in the U.K.
With Netherlands (33 percent) and France (8 percent) ideintified as second and third choice respectively, Germany was identified as the preferred destination for those investors moving out of the U.K. (54 percent).
Particularly with regards to operating margins, purchase costs and sales, already seven in ten foreign investors say they have been impacted by Brexit.
The financial services industry and has been one of the hardest hit by the vote. While 6 percent are expecting to “slightly reduce” their existing presence in the region, just 12 percent say they anticipate strong growth.
As they prepare for trading disruption, UBS and HSBC warned earlier this month, that they could each move about 1,000 jobs out of the U.K.
Identified as more fundamental concerns for financial services firms, compared to manufacturing firms, were Brexit and European Union stability according to the EY’s study.
Despite recent geopolitical uncertainty that has dominated the region, global investors plan to grow their presence in Europe over the coming, the study also found. Going some way in dispelling wider concerns about the impact of political upheaval on underlying investment behavior, the findings in fact note an uptick in investor sentiment over the past year, and in particular since the U.K.’s shock Brexit vote.
Planning to grow their exposure to Europe over the next three years were 56 percent of the 254 global investors that were studied by EY. In comparison just 36 percent of Europeans said they were optimistic about the future of Europe one month prior to Brexit – in May 2016.
Since Britain comes forward with greater details on its impending departure from the EU and as leadership races heat up in the Netherlands, France and Germany, the results assume importance.
Volatility, particularly with regards to currencies, commodities and capital markets is of more concern for investors while not entirely unfazed by the political landscape. while economic and political instability within the EU (excluding Brexit) worried 32 percent and Brexit itself concerned 28 percent, 37 percent said these fluctuations posed the greatest risk to their investment decisions.
The findings were reassuring but warned against complacency, said Andy Baldwin, EY area managing partner for Europe, Middle East, India and Africa.
“It is encouraging that the investors we are tracking continue to have strong investment appetite in Europe despite the instability and mixed geopolitical environment. However, investor patience is finite. Europe’s historical investor appeal was built on certainty and predictability.
“Europe is in danger of developing an emerging market ‘geopolitical risk profile’ without commensurate returns. For the foreseeable future, pure economic factors will vie alongside political considerations in influencing final investment decisions.”
(Adapted from CNBC)
Categories: Economy & Finance