New research reveals that optimism in the UK investment environment is holding up well, and is higher than this time last year, despite the uncertainties of Covid and Brexit, according to the annual Investment 360 Index conducted by management consultancy CIL. The research found that business leaders and investors have shifted towards a significantly more negative short-term economic outlook year-on-year, with a net negative of 70 per cent, down from a net negative of 58 per cent in 2019. It’s clear that the economic hit caused by Covid-19 combined with ongoing Brexit uncertainty weighs heavily on the minds of investors and management teams. Many believe this will exacerbate already rising levels of unemployment, while small businesses are simply less resilient, having dipped into cash reserves when responding to the initial Covid-19 crisis.
However, when asked to think about the economic picture and investment environment long-term, the same respondents tell a more positive story. Despite these extraordinary headwinds, long-term economic sentiment has reached a net positive of 58 per cent. Respondents believe that the economy is experiencing short-term uncertainties and fundamentally the UK will continue to be an attractive place to work, to innovate and to invest.
Furthermore, sentiment towards the investment environment has increased since last year, by a net positive of 9 per cent. This brings the view back in line with the findings of 2017 and 2018, with 2019 experiencing a substantial dip due to distrust in the May Government and ongoing Brexit negotiations. This shift in positive sentiment is due to several factors; dry investment powder remains at record levels, with the current environment creating opportunities to invest in sectors which have been positively affected by Covid-19 – such as tech-enabled consumer, health and education businesses, areas which the UK are fundamentally strong in.
Giles Johnson, managing partner at CIL, says: “Our survey shows that current challenges have not dampened longer term optimism for investment and M&A. Government support, monetary easing and the financial sector are in better shape than they were in 2008, meaning that respondents expect Covid-19 and Brexit to be considerable, but not insurmountable challenges. Maybe our findings are tinged with relief given how eerily quiet April and May were. But they do show the wheels of investment are expected to adapt and to keep turning as they have many times before.”
