Business News Round Up (15/08/2022)
Private equity deals pass pre-pandemic levels
Private equity investment in Scotland’s mid-market businesses has surpassed pre-pandemic levels, though it is showing signs of slowing. There were 35 private equity deals worth £$2.1 billion in the first six months of 2022. This was the largest half year number in the last five years and a 75% increase on 2019 when 20 deals worth £1.4bn took place. Despite uncertainty caused by the ongoing conflict in Ukraine and the cost-of-living crisis, both volumes and value of mid-market investments in Scotland grew year on year by 46% and 100% respectively, with technology and life sciences the most in demand sectors. However, the data from KPMG UK suggests that the market is likely to soften in the second half of 2022, as uncertainty returns. Graeme Williams, director of corporate finance M&A at KPMG UK, said: “After back-to-back years of disruption for dealmakers and investors we saw a real return to form in the first half of this year, as pent-up demand was released across Scotland’s mid-market. It’s heartening to see half year levels surpass pre-pandemic volumes and values, and we’re very much on track for a record-breaking year well above five-year averages, even if investor activity cools off in the months before Christmas. However, with so much uncertainty globally and across the UK’s economy, diligence and valuations may become more challenging, which in turn may make it harder for private equity houses to move forward with conviction when looking for the best investment opportunities.”
https://dailybusinessgroup.co.uk/2022/08/private-equity-deals-pass-pre-pandemic-levels/
European office market faces biggest test since financial crisis
Europe’s office market faces the toughest conditions since the financial crisis, experts have warned, as rising interest rates and a surge in building costs threaten to choke off its recovery from the pandemic. Higher interest rates and a broader tightening in financial conditions have driven the cost for office owners of servicing their debt above the rental income they receive for the first time since 2007, according to an analysis by Bank of America. That is already cooling investment into the sector and could cause distress for highly leveraged office companies. Rising base rates have added to office owners’ debt servicing costs. But that is merely the tip of the iceberg, according to Marc Mozzi, a real estate analyst at BofA. “When people are talking about interest rates, that represents only about a quarter of the cost of borrowing for European real estate companies. The credit spread is the hidden part of the iceberg,” said Mozzi, referring to a measure of how much more a company has to pay to borrow compared with a sovereign issuer. Over the past 12 months, credit spreads have doubled for UK-listed real estate companies and almost tripled for European groups, calculations from BofA show, indicating that bond investors are increasingly anxious about the companies’ creditworthiness. The deteriorating outlook comes after the Bank of England earlier this month delivered the biggest rise in its key interest rate in more than a quarter of a century, as it steps up the fight against inflation. The office market had a buoyant start to the year but has sunk since. In London, the value of deals completed in the first quarter of the year was 105 per cent above the 10-year average; but in the second quarter it was 27 per cent below that level, according to Mark Ridley, boss of estate agency Savills.
https://www.ft.com/content/2bb31a91-2563-4481-b954-16961ec53a1d
Scottish salmon industry facing ‘acute’ labour shortages
Scotland’s salmon industry is facing “acute” labour shortages due to Brexit. In letters to candidates in the Conservative Party leadership contest, Rishi Sunak and Liz Truss, Salmon Scotland has called for a more “enlightened” approach to immigration to assist businesses. The body says the industry does not have enough staff across key skill areas due to workers returning to their homes in Eastern Europe as a result of Brexit. Very low unemployment and extremely limited labour availability in areas where our businesses have processing facilities – namely Rosyth near Edinburgh, Argyll, Fort William, Stornoway, Dingwall and three separate sites in Shetland – mean processing factories are running 20% light on staff. A change to key worker definitions, changes to the salary cap level and a broader public signal that the UK is open to people and thus to business have been cited by the body as measures to improve the issue. They have also asked candidates to take a “pragmatic” approach to trade negotiations with the EU, avoiding a so-called “trade war”, with a “clear focus on the nation’s export businesses who depend on a positive, professional relationship with France and the other countries of the EU”.
https://www.insider.co.uk/news/scottish-salmon-industry-facing-acute-27740463
UK businesses buckling under immigration backlog described by expert as worst he’s seen
UK businesses looking abroad to fill staffing shortages have been left in the lurch by an immigration backlog described by a leading lawyer as amongst the worst he has ever seen. Matthew Davies, partner and head of Business Immigration at Leamington-based Wright Hassall said parts of the system on which businesses depend have been left under-resourced during the war in Ukraine. The situation is especially acute for entry clearance applications, which are visa applications made by applicants who are outside the UK and need permission to enter for a particular purpose, often work or business. He said: “It is the news story that hasn’t broken. Many of the frontline staff have been moved to deal with humanitarian applications from Ukraine, but there has not been enough investment to keep the rest of the system running.” The UK’s response to helping displaced Ukrainian citizens find safe haven has been criticised in the media for being too slow, with the Government reacting by diverting frontline Home Office staff to deal with their applications. In doing so, it suspended most pay-for priority services so that decisions which employers assume would take days suddenly began taking weeks or months – and Mr Davies said politicians need to start talking about the problem.