Green Shoots Of Confidence

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14th July 2020

Money Matters

As the nationwide lockdown eases, the economic outlook for the country remains difficult to predict. On 18 June 2020, the Bank of England announced a further £100bn was to be pumped into the UK economy to battle against any potential downturn, with interest rates being kept at a record low of 0.1%. Whilst the Government has introduced many schemes to help businesses and employees during these unprecedented times, such schemes have cost billions of pounds and will take many years to repay. Just looking at one of the measures brought in by the government, the Office for Budget Responsibility in early June 2020 predicted that the Coronavirus Job Retention scheme is due to cost the UK economy somewhere in the region of £60bn - £80bn. With a further announcement in early July that the Chancellor is cutting VAT, providing a “kickstarter” employment programme and rewarding employers who retain staff who have been furloughed, there is clearly a concern that unemployment rates will rise over the coming months and further damage what is a very fragile national and global situation.

And yet, as the high street, pubs, bars and cafes start to reopen, there are also other signs that the economy showing some, albeit small, positive signs. Reports in the press suggest consumer spending increased in May and June, and with schemes like the “Eat out to Help Out Scheme”, it is expected that this trend will continue into the summer. At Howes Percival, there are also signs that whilst a number of corporate transactions were initially put on hold during lockdown, many are starting to come back online notwithstanding a need for additional due diligence and investigations on potential targets. Trends suggest deals are taking longer to get to completion, but during the last three months, Howes Percival’s Northampton corporate team have completed a succession of fundraising, private equity and trade sale/acquisition transactions, showing there is still confidence in UK based businesses, whether you are acquiring or selling, and showing deals can still be done despite lockdown.

The first of these was a six-figure investment in a product development company based in the region, which helps support companies introduce new products and processes to market. At a time when UK businesses are looking for efficient and cost effective ways to clawback lost revenue due to the lockdown, new product development can and will be key to the ongoing success of many industries.

We also advised the seller of a post and franking machine maintainer and distributor business, who sold his business to a national trade buyer. With a loyal client base and the attractive option of becoming part of a much bigger national brand, the deal concluded midway through lockdown and will allow the business to continue to flourish under its new owners.

Finally, the corporate team were also able to act for a multi-national private equity firm on its acquisition of an award winning UK brewery, as part of Howes Percival’s client’s wider strategy to invest in the UK beverage market. At a time when much of the hospitality industry was firmly shut down, including pubs and restaurants, the deal shows the continued confidence that investors have in the long term prospects of the UK’s Food & Drink sector, a sector for which Northamptonshire is firmly a leader.

The underlying message is there is still corporate finance activity happening, and there are still willing buyers and willing sellers wanting to secure future growth and viability for their businesses. If you are considering a corporate transaction, whether a disposal, acquisition or fundraising exercise, please do contact one of Howes Percival’s corporate specialists who would be delighted to assist: https://www.howespercival.com/services/corporate/