Brexit 'could damage' UK tech firm valuations

However, report finds M&A will be buoyant over the next 12 months

Investors think Brexit will have a negative effect on the value of UK tech businesses, but the economy will bounce back and the long-term future holds a much more positive outlook. 

The report by accounting firm Moore Stephens has suggested that more than half of investors think that the valuations of UK tech firms will drop over the next 12 months, although 44% think mergers and acquisitions will become a major part of investment. Just over a quarter of investors think the number of such deals will fall.

Moore Stephens think the tech industry is in a much stronger positions than traditional industries though and for this reason, it won't be as negatively affected as other sectors.

"From a digital standpoint the UK is and will be one of the world's key digital destinations and hard for investors to ignore," Damian Ryan, partner at Moore Stephens, said. "Investors are still looking to make deals, especially when the technology involved has significant commercial potential.

"The tech sector doesn't have the same investment characteristics as more traditional business sectors so although Brexit may bring about a slight confidence knock, our research suggests that investors are still keen on backing UK tech companies."

A number of major investments have been made over recent months by larger companies seeking to carve out a part of the innovative UK tech sector. Japanese tech giant Softbank announced in May that it would be sinking more than $500 million into UK-based VR startup Improbable, considered to be the largest European Series B investment ever. 

Other findings from the report showed the attitudes of trade buyers, such as large tech companies were more positive than private equity (PE) and venture capitalist (VC) investors because they will use the technologies to transform the organisation rather than simply making money. Additionally, trade buyers will use their own shares to buy other companies, meaning they are less sensitive to high valuations compared to PE and VC investors.

"The impact of Brexit negotiations will no doubt cause short-term waves but ultimately it's clear that the sector has belief in the ability of the UK to ride out the storm, and that the talent and investment will continue to see the UK as being at the vanguard of the global tech space," John Stanford, Head of Moore Stephens' Brexit Workgroup added.

Featured Resources

How to scale your organisation in the cloud

How to overcome common scaling challenges and choose the right scalable cloud service

Download now

The people factor: A critical ingredient for intelligent communications

How to improve communication within your business

Download now

Future of video conferencing

Optimising video conferencing features to achieve business goals

Download now

Improving cyber security for remote working

13 recommendations for security from any location

Download now

Recommended

The IT Pro Podcast: Navigating Brexit data transfers
data protection

The IT Pro Podcast: Navigating Brexit data transfers

5 Feb 2021
Border force reliant on 26-year-old tech due to digital upgrade delay
digital transformation

Border force reliant on 26-year-old tech due to digital upgrade delay

9 Dec 2020
UK data laws after Brexit: Your questions answered
General Data Protection Regulation (GDPR)

UK data laws after Brexit: Your questions answered

30 Oct 2020
COVID-19 and Brexit are rendering AI models redundant
Data & insights

COVID-19 and Brexit are rendering AI models redundant

23 Sep 2020

Most Popular

How to find RAM speed, size and type
Laptops

How to find RAM speed, size and type

26 Feb 2021
How to connect one, two or more monitors to your laptop
Laptops

How to connect one, two or more monitors to your laptop

25 Feb 2021
Ransomware operators are exploiting VMware ESXi flaws
ransomware

Ransomware operators are exploiting VMware ESXi flaws

1 Mar 2021