Is a post-Brexit landscape a wealthier one?

Luke Davies

Following the referendum in June 2016, when Britain announced its intention to leave the EU, business leaders feared the negative economic impact of the UK leaving the single market, with investor sentiment presenting signs of caution in the short-term.

The immediate market volatility caused as a result of the shocking outcome of the referendum has resided significantly in the year and a half since, with investors presenting significantly buoyant attitudes towards innovative investment opportunities present in the domestic market.

Rather than paint a pessimistic picture of the post-Brexit landscape, recent industry research indicates that high-growth small business accounted for over 20 percent of UK economic growth and for over one in five jobs created between 2015 and 2016.

These figures have been met with increasingly enthusiastic investor sentiment, as 6.4 million investors expressed interest in SME and new age sector opportunities. Broken down by region and sector, the evidence goes to show that the post-Brexit landscape is one of innovation and diversified investment opportunities.

Luke Davis, CEO and founder of IW Capital, said that in his view the shock of Brexit will create new avenues of innovation into the UK in a similar way to the boom in fintech that followed the great financial crisis.

The UK economy has undergone a post-Brexit rally, with London and Partners (the Mayor of London’s promotional agency), reporting ever-increasing levels of private investment into the capital.

Supported further by the UK tech sector shining strong in 2017 with a record £2.99 billion attracted by SMEs, investors put a record £46billion into funds over the year, a 600% increase on 2016’s figures, according to “Brexit vs Deal Flow,” a report by the Enterprise Investment Scheme Association (EISA).

Moreover, The British Business Bank – the UK government’s SME-facing investment bank – reported that the value of SME asset finance deals was up 12% in 2017, with the value and number of SME equity deals up 79% and 12% respectively.

Despite several reports of middling confidence among entrepreneurs, buoyant investor sentiment has been met with an advancement in government support-systems – such as the Patient Capital Review and doubling of the EIS investment cap for knowledge intensive SMEs – to make private sector opportunities more accessible to a new cohort of retail investors.

To give momentum to these growth prospects, especially given the anticipated rise of SME investment in the near future, industry partners and government alike must make it a priority to communicate the existent levels of investor appetite to business owners, in a bid to re-instil flagging levels of confidence. According to Davis, there has been “no appreciable negative impact on IW Capital so far since the referendum eighteen months ago.”

With over £100 million in assets under management since inception, IW Capital’s growth as a boutique debt and equity SME investment specialist is indicative of the vital platform of growth alternative finance provides the nation’s intrepid entrepreneurs.

Davis argues that smaller firms must be supported through the tax system and grants. SMEs should also “welcome any regulatory advancements or trade opportunities that would make it easier to do business both domestically and abroad”.

Across all sectors, but especially among new-age businesses operating within the fintech, medtech or energy tech spaces, there is a strong desire for growth and expansion to take advantage of the greater trade opportunities ahead of them outside of the single market.

In a recent report from IW Capital, 59% of UK based investors said that they are looking to invest into energy tech in 2018, with 58% and 48%% looking to medtech and fintech respectively.

Supported by conclusive industry research, a clear call to action now presents itself to investment providers, policy-makers, prominent industry commentators and wider government.

We, as a community of industry influencers, bear significant responsibility to support the nation’s SME leaders to meet the outstandingly positive levels of financial support within the private investor community with continued levels of confidence and growth. In what are set to be testing times for all that navigate Brexit, the architects of a post-Brexit private sector deserve significant priority.