Brexit and Covid-19 fail to dent GCC investor appetite for the UK

Brexit and the UK's handling of the Covid-19 crisis have not dampened GCC investor appetite, experts say, with opportunities improving in FinTech, decarbonisation, life sciences and infrastructure.

Britain's exit from the EU has actually boosted investment opportunities, according to panellists at the GCC-UK Trade Circle Summit on Tuesday, as the UK can make fast decisions because it is no longer subject to the red tape that comes with being a member of the economic bloc.

Matthew Hurn, executive director and chief financial officer for  disruptive investments at Mubadala Investment Company, said the UAE and the UK have strong historical connections between their respective royal families but the landscape has changed over the past year.

"Firstly, you now have a government with a significant majority … which gives you comfort that actually you are talking to and building relationships with ministers that have longevity," said Mr Hurn.

“The second most important part is the Brexit overhang is gone. Irrespective of whether you believe Brexit was a good idea or a bad idea, that uncertainty was not a good environment for potential investors. So, with that overhang now gone, it is very clear exactly the economic landscape in which you are playing.”

Fellow panellist John Bryson said the UK offers a significant advantage to GCC investors hunting for opportunities because of its English language, the long-term stability of its political system and its governance system.

“Of course, now, within a post-Brexit environment, it has the ability to be rapid in its decision making. So, irrespective of which government might be might be in power, you do not have the constraints of having to have things cleared by the European Commission, and various decisions that might need to have gone through the other EU member states,” said Mr Bryson.

“So, the UK is able to work out its own strategy. And if the UK government is behind a particular decision, [it can] make a really rapid decision. So, something can happen within weeks or months rather than years."

Gavin Holland, a partner at global FinTech-focused venture capital fund Anthemis Group, which has about 10 investors from four GCC countries, said he has not received a single question about Brexit in the past 12 months,

“While with Brexit there is still a lot of work to do, investor confidence has moved on from that. That is less important by a long stretch," he said.

Meanwhile, the Covid crisis, which has resulted in the UK recording the second-highest number of cases in Europe and one of the highest death tolls, has fuelled digital transformation across several industries.

“It is creating huge opportunities for businesses and investors to build new business models and accelerate things that otherwise might have taken decades," said Mr Holland.

"While these things have been very painful for all of us and created a lot of constraints and heartbreak around the world, they are from a business perspective driving digital transformation. That is true in FinTech and it is true in other sectors. And I think the UK has lots of opportunity in all those sectors.”

As well as FinTech, other sectors ripe for investment include decarbonisation and life sciences, according to the panellists, with the UK government setting very clear guidelines in its manifesto about the areas of the economy where it wants to attract investment.

In March, the UAE agreed to invest £1 billion ($1.38bn) in Britain's life sciences industry under the Sovereign Investment Partnership signed by the two countries.

Abu Dhabi’s Mubadala will plough £800 million into the industry over the next five years while £200m will come from the UK’s Life Sciences Investment Programme that was unveiled last year.

Mr Hurn said the UK’s world-class academia, which have made some of the most innovative advances in life sciences, make it an attractive proposition.

“When you start looking at drug discovery, drug development, medtech, digital health – [they are] very capital-intensive, IP-intensive businesses that actually need growth capital and I think there is a huge opportunity there,” he said.

FinTech is also key, he said, because London "is undoubtedly the FinTech capital of the world", as well as software services and technology advances in transport.

“The other two areas that are really important if you listen to what the UK is talking about now [are] infrastructure and the whole levelling up message."

Mr Hurn said the UK is "far more than just the City of London" and pointed to the country's new freeports, including Teeside Freeport in the north of England, which offer "significant infrastructure opportunities".

"That could be physical infrastructure," he said. "But it is also around data storage, as well as broadband connectivity; they give access to the UK population," he said.

Energy transition and the journey to net zero are also important, Mr Hurn said.

“Obviously, the UK will host Cop26 later this year. They are starting already at the G7 to talk about advances and commitments to get to net zero," he said.

"And if they are looking at things around energy storage, electric vehicles, there are so many opportunities there.”