Private Equity Archives - WA Communications

Mission Zero: Chris Skidmore’s independent review and America’s Inflation Reduction Act

America’s Inflation Reduction Act (IRA) is one of several major pieces of legislation underpinning the bold new economic agenda of the Biden administration. Its name is misleading as it will have little impact on US inflation but is the combination of a domestic industrial policy and an ambitious strategy for net zero, offering $369 billion in investment and tax breaks over the next ten years.

Across the pond, the IRA has been sharply criticised by UK and European politicians and policy wonks due to strict “made in USA” rules that would disqualify European based companies from generous tax breaks and lucrative investment opportunities. UK Trade Secretary, Kemi Badenoch described the legislation as protectionist, stating “it is onshoring in a way that could actually create problems with the supply chains for everybody else.” It risks incentivising companies to re-locate to North America and diverting investment away from the UK and Europe.

Or to quote the Chair of the UK’s Energy Digitalisation Taskforce, Laura Sandys CBE, “the IRA is a game changer… big investors are saying ‘US first, Europe second, Asia third and if you’ve got any spare peanuts at the end of it maybe you can look at the UK.’”

As the US Treasury and Department of Energy are expected to publish IRA guidance in March, UK and EU energy ministers are haggling with their American counterparts to secure concessions and minimise the risks to their respective energy markets and economies. For UK investors, it also prompts questions about the state of play closer to home, with the Conservative Government’s approach putting the UK at risk of falling behind in the global race to maximise the growth potential arising from net zero.

Green leadership in the UK

To rephrase an idiom, the Government’s approach could be described as ‘all wind but no power’. Whilst the UK’s net zero ambitions are well rehearsed by politicians and have been written into law, the policies and funding fail to match the rhetoric. This has created a vacuum which the Labour Party is filling with its Green Prosperity Plan and the promise of £28 billion annually for capital spending on projects designed to tackle climate change.

The Government will need to move quickly for two reasons. Firstly, the High Court ruled in July 2022 that ministers need to explain and substantiate how they plan to deliver on the Government’s Net Zero target by April 2023 following a successful judicial review by climate change campaign groups.

The Court-ordered report is likely to be wrapped up with Government’s response to the independent review of net zero, published in January 2023 and chaired by former energy minister, Chris Skidmore OBE. Skidmore’s 340-page review contains 129 policy recommendations that present the economic case for net zero as “the growth opportunity of the 21^st century”.

Secondly, as highlighted by Skidmore’s review, many of the UK’s competitor economies have already made bold and ambitious interventions. Both the USA’s IRA and the EU’s €250 billion Green Deal Industrial Plan provide significant funding and the long-term policy certainty that is mission critical to securing private sector investment in their respective economies. If UK investors are left out in the cold, the UK risks not only losing out on new opportunities, but also current economic activity moving away.

What next for investors?

UK investors can expect the Government to act imminently. Ministers are acutely aware of the competition concerns arising from the USA’s IRA and will want to exploit the UK’s pre-existing market strengths. While the UK cannot compete with the sheer industrial capacity of North America, it is likely ministers will seek to capitalise on the UK’s strong science base and highly specialised expertise in both clean technologies and green finance.

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Gold in the Garbage: Private Equity turns to waste

The waste sector is making headlines in the private equity world as investors are searching the rubbish for opportunities. Admittedly, it is not the most glamorous of industries, but there is good reason for the spiked interest in waste and recycling and it is likely to gain traction in the coming years.

The £1.4 billion bid for waste management company, Biffa, is the latest move in the rush of investment into waste and recycling. This follows moves by KKR to buy Viridor (waste management), Macquarie to buy Beauparc (recycling services) and Ancala to acquire Augean (hazardous waste management). Reconomy (waste broker) was acquired by EMK Capital in 2017 and has since embarked on an aggressive expansion strategy to become one of the sector’s biggest operators.

The pandemic has accelerated this trend, increasing the attractiveness of critical infrastructure and shining a light on its stability in uncertain times. Since then, the regulatory and political direction of travel towards the circular economy has boosted investment appetite.

The government wants us to recycle more, especially as rates have recently plateaued after years of rapid growth. It also wants to tackle the wave of plastic being sent abroad for ‘recycling’, which is landing atop toxic piles of waste in poorly regulated countries. To this end, plans include standardizing waste collections, introducing a deposit scheme to boost recycling of plastic bottles, and imposing ‘polluter pays’ rules that will force packaging makers to incorporate the cost of recycling into their products. According to analysts, the industry will have to invest up to £10 billion to fund the infrastructure needed to meet these commitments. Jacob Hayler, director of the Environmental Services Association, said “it definitely feels like a very dynamic, exciting growth area at the moment, with plenty of opportunity to invest.”

The bio-boom

Companies with a strong portfolio of recycling or energy from waste (EfW) infrastructure are experiencing high profit margins and levels of growth, proving lucrative for private equity backers. The current energy crisis is favouring the domestic supply of energy and the government’s focus on a windfall tax for large oil companies has allowed many EfW plant operators to reap the rewards of higher prices. Sector specialists have explained that many of these plants were modelled on an expected power price of approximately £60 MWh, but current revenues are about £200 MWh, so income has tripled, turning biomass and EfW plants into green cash cows. As a result, large investment firms specializing in infrastructure are circling such projects. For instance, Copenhagen Infrastructure Partners has active investments in SSE’s Slough Multifuel project and is part of a joint venture with FCC Environment for the Lostock EfW plant.

The demand for recycled materials is also growing. London-based PE firm, Exponent, formed the wood recycling and biomass supply specialist, Enva, after acquiring DCC Environmental. Following an acquisition spree, it is now one of the largest wood recycling firms in the UK and supplies a large amount of recycled material to biomass plants which has proved highly lucrative. The site also turns waste into materials for the panel board industry and animal bedding products, the latter for which it won the Recycling & Waste Management Circular Economy Award in 2019.

The green rush

Investors’ interest in waste management is underpinned by the increasing prioritization of ESG in investment decisions, and the swelling of ESG funds globally. Markets such as gas, electricity and water are also more mature and therefore harder to penetrate. The fact that there are only a few large players in the waste space, of which relatively few are listed opportunities, only adds to the excitement. That being said, the market is becoming more sophisticated. Biffa has been silently snapping up smaller players, spending £260 million on 25 deals since 2016. Further consolidation is likely to gather pace as regulations are tightened and operators try to scale up to mitigate supply chain issues; doing so helps reduce costs and carbon footprints.

Investors should be mindful that waste management contracts tend to be short term and volatile, unlike in wind power where long contract terms have helped fuel a construction boost. The sector is also not immune from the cost-of-living crisis, as recessions tend to see households produce less waste. Nevertheless, the political climate is such that investors should be excited about waste management assets that can offer steady returns and can demonstrate green credentials.

To discuss the current policy and regulatory environment for waste, EfW and recycling issues in more detail please email Thea Southwell Reeves on theasouthwellreeves@wacomms.co.uk.

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The Government’s Food Strategy: a fork in the road

In the build up to the Government Food Strategy, the Prime Minister promised bold action to address the problems in the UK’s food system. This week, health and sustainability campaigners have voiced their disappointment that not all of Henry Dimbleby’s recommendations are being adopted, including the proposed salt and sugar tax.

Seemingly ‘hollowed out’, the publication is seen by many in the agri-food sector as a holding response for a serious long-term strategy that has been conditioned by Conservative backbenchers who the Prime Minister considers key to his survival. In other words, a tactical short-term response to a set of political pressures. Published against a backdrop of the cost-of-living crisis, the effects of the war in Ukraine, and recent party politics, the Food Strategy represents a notable departure from long-term priorities such as environmental sustainability and tackling obesity. Instead, the Strategy focuses on technology and innovation, job creation, productivity. In short, the government sees growth in the UK’s agri-food sector as the remedy.

The government says it is backing British farmers to boost domestic production, increase employment and grow the economy

At the heart of this shift is a concern about food insecurity. Not necessarily as a result of climate change and other environmental concerns (although those can’t be ignored for much longer), but from the impact of the war in Ukraine on food supplies and prices. As a result, the government has pivoted away from longer standing political priorities and is now focusing on plans to strengthen the resilience of supply chains and boost domestic production to help protect against future economic shocks and crises.

While wars don’t necessarily create trends, they do tend to accelerate them. In the case of the war in Ukraine, it has rapidly accelerated the desire of Western governments for freedom from supply chain dependence on Russia and China. It has also increased the trend for food nationalism globally which has lengthened the list of countries Western governments can no longer rely on for food imports as a result, and it has sped up trends towards market intervention. The last significant spike in food prices was in 2010/2011 following a heat wave in Ukraine which impacted crop harvests and can be seen as a catalyst for riots in middle income countries and the Arab Spring, the effects of which are still being felt. The impact of today’s crisis has the potential to be far greater and will be felt particularly acutely in the UK because we have relied so heavily on global markets for cheap food imports.

Agri-food: a growing sector

While new funding programmes to drive innovation will be welcomed by the sector, the government is playing catch up with investors who have recognised the potential of agrifoodtech in recent years.

As with most modern industries, technology plays a key role in the operation of the agri-food sector. However, the pace of innovation has not kept up with other industries and, according to research conducted by McKinsey, agriculture remains the least digitized of all major industries.

The industrial agri-food sector is also much less efficient than others and more susceptible to the demands and constraints being placed on it. A growing global population, climate change, environmental degradation, changing consumer demands, limited natural resources, food waste, consumer health issues and chronic diseases all mean the need for agrifoodtech innovation is greater today than it ever has been, and creates opportunities for entrepreneurs and innovators to create new efficiencies in the value chain. Many of the agrifoodtech start-ups attracting investors are aiming to address some of these challenges, identifying innovative solutions to issues such as food waste, CO₂ emissions, chemical residues and run-off, drought, labour shortages, sugar consumption, distribution inefficiencies, food safety and traceability, farm efficiency, and unsustainable meat production.

According to the 2022 Agrifoodtech Investor Report, $57.1 billion was invested in agrifoodtech companies in 2021, an increase of 85% on the previous year. 2021 also saw the UK’s highest ever deal flow with UK-based deals reaching £1.3 billion in value, the highest since data has been collected and up from £1.1 billion of investment in 2020. The UK sits 5^th in the global ranking of deals by country, just behind Germany, India, China and the USA, though the UK government has set out its intention to be a world leader in this space. While investment in so-called ‘upstream’ technologies (such as on-farm tech, tools and services) remains high at around $20m, there is a shift beginning to emerge, with interest now moving towards farm management software, indoor farming, ag-biotech (such as gene editing), and e-grocery (which attracted a third of all global sector investment).

The new normal

The challenges with our food system such as supply, distribution and pricing have been propelled by the pandemic, complicated by Brexit, accelerated by the war in Ukraine, and intensified by the cost-of-living crisis. In many ways, this has created a completely different backdrop for the UK’s food system than when Henry Dimbleby published his recommendations to government almost twelve months ago. Many commentators will argue this is why the Government Food Strategy appears to have been watered down in comparison with its original intentions.

Nevertheless, many investors have already recognised the importance and opportunity the agrifoodtech sector presents in terms of investment potential, with many more likely to follow suit. The changes and challenges to the food system we are witnessing today are not temporary. Rising prices, food nationalism, and supply chain challenges are not a blip in the road, they are the new normal. This reality means the agrifoodtech sector is likely to provide an abundance of opportunity for private equity to back exciting, innovative, and high-impact ideas that deliver the ground-breaking change in our food system that campaigners are calling for. Although this Food Strategy gives the agri-food sector ideas to work with and push the government on, it is also clear that we are now unlikely to see a properly considered long-term strategic response to food insecurity this side of the election.

To discuss the government’s Food Strategy in more detail, please email Thea Southwell Reeves on theasouthwellreeves@wacomms.co.uk.

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Holy guacamole! Vegan food for thought this Easter

2021 saw M&A in the food and drink industry bounce back from a tumultuous 2020 laden with supply chain issues, challenges from Brexit, and workforce disruption. According to findings by commercial law firm EMW, the value of M&A deals for UK food and drink companies jumped 950% to £4.5 billion in 2021, up from £430 million the previous year. Interest from private equity helped drive the rise in M&A. In total, 24 UK deals in 2021 were PE backed, making up 42% of M&A deals in the sector. This is up from 31% in the previous year.

Whilst plant-based, free-from and sustainable food and drink have been upward trending for the past few years, it is now clear that they are entering a new stage of growth, with M&A transactions rocketing in the last year. Investments in the ‘low and no’ alcohol and premium soft drinks market also continue to thrive; consumption of these is currently forecast to grow 31% by 2024. And across all subsectors, transactions in healthier and low sugar options continue to rise as trends point towards healthier food and drink options being more attractive to consumers. This is mirrored by a decline in food-to-go, confectionery and frozen foods transactions.

You need only visit the seasonal aisle of your local supermarket to see that vegan easter eggs and sugar-free chocolate are the big trends this Easter, and initial market data is also signaling this. According to research by B2B online marketplace ShelfNow, online searches for ‘vegan easter eggs’ in the UK rose by 79% between 2020 and 2021, while online searches for ‘sugar-free’ reached their highest point in the last five years. To this end, the UK has launched the largest number of food and drink products with a ‘no added sugar’ label in Europe.

Sustainability in food and drink is also catching our attention, with demand for British produce and environmentally-friendly products on the rise. The emerging agritech subsector is booming, with new investment in the global market receiving a record $10.5 billion injection. The UK continues to lead the way in Europe, with the 2021 AgriFoodTech Investment Report outlining $1.1 billion of investment and 164 deals recorded in 2020.

This could be explained by private equity’s spiked interest in environmental, social and governance (ESG) issues over recent years, as investors increasingly acknowledge the role such factors play in influencing M&A decision making. There is now widespread recognition in the investor community that ESG considerations continue to move from after-thought to essential hygiene factor. There is certainly a recognition that investment should align with an organisation’s embodied values. We witnessed this in action recently when many businesses ceased operations in Russia following its invasion of Ukraine. Furthermore, the adoption of a formal ESG strategy is increasingly seen by some investors as a value-creation mechanism. Shifts in mindset like this are closing the gap between the corporate treatment of ESG and its standing within the investor community. With organisations returning to growth mode, we expect the role of ESG to continue to increase at pace.

Though it may seem ripe for the picking, investors with an interest in the UK food and drink market should be mindful of navigating regulatory and policy changes in this space.

The Covid-19 pandemic has altered the government’s approach to addressing obesity. As part of the Obesity Strategy, the government will introduce a ban on advertising foods high in fat, sugar or salt (HFSS) on TV before 9pm and a total ban on online advertising. Restrictions on the placement and promotion of HFSS products in stores will also be introduced. With the spotlight growing on childhood obesity, these issues are firmly set in the political landscape.

Similarly, the government has outlined proposals for reducing plastic waste in England, which will impact food and drink packaging. Plans include banning certain products, a new Deposit Return Scheme for drinks bottles and an enhanced producer responsibility regime to incentivise a reduction in plastic packaging. The Plastic Packaging Tax came into effect on 1 April 2022, introducing a levy on plastic products containing less than 30% recycled plastic content. As this regulatory direction of travel continues, under mounting public pressure and in light of increasingly disturbing IPCC climate reports, investors should expect regulations to become increasingly restrictive.

Investors should also expect the rising prices of energy and raw materials to be a significant issue in 2022. Russia’s invasion of Ukraine and the subsequent sanctions, trade restrictions and supply chain disruption are likely to translate into rises in food prices and temporary shortages, according to the Food and Drink Federation. We saw global wheat prices spike at over 80% higher than last year, while sunflower oil becomes rapidly scarce. Global transport problems and workforce shortages will also continue to be disruptive to the industry and full custom controls introduced for goods moving between the EU and UK are causing headaches for food and drink importers.

Nevertheless, the UK food and drink market is clearly at a fork in the road.

We expect private equity to capitalise on this in the coming year. Plant-based, free-from, low sugar, healthy food and drink with a low environmental footprint is likely to bear the most fruit, and that should give investors plenty of food for thought this Easter weekend.

To discuss the government’s current approach to food and drink regulation, please email Thea Southwell Reeves on theasouthwellreeves@wacomms.co.uk.

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Statement of Intent: Rishi goes from spender to saver…for now

This article originally appeared in Real Deals on 24 March 2022.

Rishi Sunak might have hoped that his first truly post-Covid fiscal statement could be one brimming with sunny optimism. With the Perspex screens, masks and social-distancing markers gone from the Commons, he perhaps imagined enjoying his time in the spotlight buoyed by impressive growth figures, record employment and harmony throughout the land.

Instead, as the Chancellor rose to deliver his Spring Statement he was faced with an unenviable challenge. Rising energy prices, global disruption to supply chains –exacerbated by the Russia-Ukraine war – have driven up living costs to the point of crisis. Add to this the threat of inflation creeping into double digits before too long and Sunak’s task begins to look Sisyphean.

With this context in mind, it was crucial that the Spring Statement needed to outline the government’s plans for addressing immediate economic imperatives and set out a coherent plan for tackling the economic headwinds that threaten to cause economic hardship for millions over the coming months.

And that’s what we got, to an extent. Sunak’s approach sought both to meet the short-term challenges which the economy faces and to demonstrate something of his own ideology in charting a course for the longer term. Since he took office in No.11, the Chancellor has had little opportunity to set out his stall as a true fiscal conservative. This Statement was a marker, outlining a multi-year plan towards economic strength and sustainability, and looking beyond immediate tax rises and medium-term tax cuts.

Saving today, but more spending likely in the autumn

Sunak’s tone was, for the most part, sombre. He repeated the government’s commitment to provide military and humanitarian resources to Ukraine and to ongoing sanctions on Russia, but warned that this would not be cost-free. He told MPs to prepare for the economy and public finances to worsen – “potentially significantly”. The OBR feels similarly, and has revised its GDP growth forecasts downwards, to 3.8% in 2022 and 1.8% in 2023.

Sunak set out headline-grabbing plans to raise the National Insurance Contribution threshold by £3,000 – bringing it in line with the income tax threshold – alongside a drop in fuel duty by 5p per litre for 12 months, and exempting energy efficiency measures from VAT. The Chancellor will use these as clear examples of the additional – decidedly Conservative-sounding – support he is offering.

He has deliberately chosen not to capitulate to those calling for another spending spree to handle the cost of living, instead choosing to save and to leave a clear “margin of safety” to create fiscal headroom. This has not gone unnoticed. The RAC has already called the fuel duty cut “a drop in the ocean” and the Institute for Fiscal Studies has expressed concern about support for those on means-tested benefits. This may come with a political cost. Sunak has gambled that the benefits of focusing on tax cutting outweigh the risks, but with even the Daily Telegraph focusing on the coming cost of living crisis, there is every chance that Sunak will be forced to revise his fiscal strategy.

Charting a low-tax course

In tone and emphasis, this was a very different Sunak to the one who delivered the Budget last October. Where that Budget made large spending commitments – raising the budgets of every government department – the Spring Statement acknowledged that rising inflation will mean that the real-terms increases will now be less than anticipated. Where last year’s Budget revolved around the ever-present phrase “Levelling Up”, this time the Chancellor didn’t say those magic words once.

Instead, the Chancellor unveiled his new “Tax Plan” – an approach to reduce and reform taxes for people and businesses, with more detail on measures due in the Autumn Budget. The publication of the Plan signals a clear direction of travel for the Conservatives for the remainder of this parliamentary term, and the rationale seems clear: the Chancellor wants to keep backbenchers concerned about the tax burden becoming too high on side. His ambition to lower the basic rate of income tax by 1% by 2024 is a sure sign that reducing the tax burden on voters will be a key part of the Conservative strategy at the next election.

But the government will need to walk a careful tightrope over the next two years. It will have to provide enough support to those in immediate need, maintain sufficient headroom to deal with further uncertainty, and still offer enough eye-catching policies to the electorate to reverse their current deficit in the polls.

The Chancellor has been clear that engaging with businesses will be key to the success of this plan. He has long sought a “business-led recovery” and is likely to provide ample opportunities for businesses to make their voices heard as the next Budget approaches. With changes to R&D tax credits, reductions in investment taxes and new incentives for employee training all under consideration, investors will want to make sure that their portfolio companies think carefully about the changes that they would like to see, and develop clear strategies for conveying those ideas to the government over the coming months.

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Rishi’s recipe for growth: private sector investment

Capital, people, ideas. A simple strategy but one built on much thought and observation about the future direction of the global economy, and Britain’s place in it. These are the strategic priorities outlined by Rishi Sunak in his Mais lecture last Thursday. To be more accurate, the word ‘private’ should be added as a critical pre-cursor to all three words.

This was the heart of Sunak’s ambition, to incentivise much greater private sector investment in all three areas. Sunak’s position as a free-market enthusiast was never in doubt and this belief in the benefits free markets deliver sits at the heart of his political and economic philosophy. As such it is unsurprising that his core aim is to lift private investment rather than deploying the power of the state. This approach will be challenged as pressure grows for intervention to soften the impact of rising inflation and the cost of living crisis but his starting point is fundamentally fiscally hawkish.

But what does this tell us about Sunak’s likely approach to policy development in future and key questions around tax and spending priorities?

No un-funded tax cuts

This message was unambiguous. Sunak wants to cut taxes but emphatically does not believe that all tax cuts automatically pay for themselves. Indeed, the unspoken message here was more about tax rises coming down the line. The example cited was Thatcher and Lawson in their first term – fixing the public finances before going on to deliver lower taxes.
There is already intense pressure from the Tory backbenches to scrap or delay the national insurance rise due in April. It is clear the Chancellor will resist those calls if he possibly can given the premium he is placing on strengthening the public finances. This will be a key test of the strength of his resolve, and political positioning ahead of any future leadership bid.

Capital: options to drive more investment

The Chancellor acknowledged that a ‘cloud of uncertainty’ over Brexit and Covid had played a part in holding back business investment but set out his ambition to turn that around now that the cloud had passed. He accepted that low corporation tax on its own had not been enough and indicated that cutting taxes on business investment will be a future priority. Capital allowances are the most obvious tool to deliver this which is likely to be good news for manufacturers.

People: promoting lifelong learning

Consistent with his central theme, the message was that the state is playing its part with an upbeat analysis of the state of schools and university education in the UK. The gap in the Chancellor’s view is the provision of adult technical skills and the need to promote continuous lifelong learning. He wants to see much greater investment from the private sector in upskilling the UK’s workforce.

He pledged to ‘reform the complexity and confusion’ of the current technical education system, noting people currently must navigate a menu of thousands of different qualification options at levels 3 and 4. Reform is clearly on the agenda. Beyond this, he noted he would examine whether the Apprenticeship Levy ‘is doing enough to incentivise businesses to invest in the right kinds of training’.

There will clearly be opportunities for business to inform the Treasury’s thinking on how best to incentivise skills investment, with greater flexibility in the Apprenticeship Levy a potentially valuable outcome.

Ideas: more R&D required

Once again, Sunak’s diagnosis is that the state’s contribution is already generous enough and the gap that needs to be filled is from the private sector. His vision is optimistic, believing new technology such as artificial intelligence can significantly boost productivity across multiple sectors of the economy. However, he was ambiguous on the mechanism for delivering this.

The tax regime is the clear focus for intervention and Sunak strikingly noted that despite apparently generous R&D tax reliefs available in the UK, ‘business spending on R&D amounts to just four times the value of R&D tax relief. The OECD average? 15 times.’ Clearly the level of the reliefs isn’t the only issue and the Treasury is likely to take a close look at how these reliefs are structured and what more can be done to reform the current approach.

This is likely to open up interesting opportunities for knowledge intensive industries, but those that currently benefit from R&D reliefs will need to be alive to the potential impact of change to the system.

Where’s the green agenda?

Many suspect (and are concerned) that the Chancellor is less interested in the green agenda and decarbonisation than some of his Cabinet colleagues. This speech didn’t assuage those worries. There was no focus on climate change or environmental issues. Indeed, the words ‘green’, ‘sustainable’ and ‘carbon’ didn’t feature at all, with only a passing reference to climate change and a single reference to electric vehicles and offshore wind as examples of areas where productivity increases could be found.

Of course, there will likely be other occasions where he seeks to burnish his green credentials, particularly as he will need a coherent green narrative in the event of any future leadership bid. But this speech tells us is that Sunak’s priority as Chancellor is first and foremost restoring the public finances and driving growth via private sector investment. Where green initiatives and decarbonisation help deliver this, he welcomes them but ‘green for green’s sake’ doesn’t appear to be part of his core focus.

What does this mean for companies seeking to influence the Treasury?

There are three core points to consider from this speech:

If you have suggestions on how to incentivise greater private sector investment in the three priority areas (capital, people, ideas) the Treasury will listen and you have a great window of opportunity this year to shape the Chancellor’s thinking.
If you are already planning investment in the UK then be sure to break down that investment and highlight how it will contribute to these three areas: don’t just give the headline figure, provide examples of the new buildings or machinery you plan to build; outline your skills investment strategy and how it will upskill your workforce; shout loud and proud about the any R&D initiatives you are bringing to, or growing in, the UK.
This Chancellor does not believe that increasing the scale or involvement of the state is the answer to driving growth. So any requests for additional funding or more regulation will simply not cut through unless supported by a clear narrative about how this will incentivise greater private investment.

The Chancellor has a plan, and it centres on businesses investing more. This means the voice of business will be critical in shaping the future economic strategy of this Government.

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On the charge: government plans to stimulate the uptake of electric vehicles

Encouraging the uptake of electric vehicles (EV) has become a key part of the government’s plans for a “green industrial revolution” and for meeting its Net Zero targets. The sale of new petrol and diesel cars and vans is due to end by 2030, by which time all new vehicles will be required to have “significant zero emission capability”. By 2035, the government plans that all new vehicles will be zero emission.

WA will shortly be launching consumer polling looking into the priorities of the public in relation to EVs, focusing on the barriers to greater uptake and on charging infrastructure in particular. The government has taken the view that expanding and improving the UK’s network of EV charging points will be key to achieving this transition. It is expected that many will regularly charge their vehicles at home or work, but sufficient provision of public charging points – including rapid charging stations on motorways and kerbside charging for those without a driveway – will be particularly important.

There is considerable regional variation in the availability of charging infrastructure. Only 1,000 of the roughly 6,000 on-street chargers, for example, are outside London, and the total number of chargepoints per head in Yorkshire and the Humber is a quarter of those in London. At motorway and A-road services, there are 145 public charging stations at motorways and A-road services, providing around 300 individual chargers across the UK.

Stimulating investment in charging infrastructure is seen as a priority for regulators and the government

In order to promote the development of charging infrastructure, regulators have been keen to encourage increased investment in the sector. In May 2021, for example, the UK energy regulator Ofcom approved a £300 million investment round for regional network companies across more than 200 low-carbon projects over the next two years. This is expected to include the installation of 1,800 new rapid charging points at motorway service stations and a further 1,750 charging points in towns and cities.

These new installations will go towards the government’s vision for the rapid chargepoint network in England, for which the Department for Transport has set the targets of having:

At least 6 high-powered, open-access chargepoints (150-350 kW capable) at motorway service stations in England by 2023;
Around 2,500 high-powered, open-access chargepoints across England’s motorways and major A roads by 2030; and
Around 6,000 high-powered, open-access chargepoints across England’s motorways and major A roads by 2035.

In pursuit of these targets, the government has allocated £950 million to the Rapid Charge Fund (RCF), designed to “future-proof electrical capacity at motorway and major A road service areas”. While the government has stated that it expects the private sector to deliver chargepoints where they are commercially viable, the RCF may provide a potential source of funds for businesses seeking to expand the charging network in areas where they can make the case for what the government calls “a clear market failure”.

Concerns over competition in the charging sector are likely to inform the government’s approach to regulation as the sector expands

Alongside efforts to stimulate further investment in the sector, the regulatory framework for chargepoints – particularly in relation to ensuring adequate competition – remains a subject of active debate, liable to evolve rapidly as more infrastructure is installed.

In July 2021, the Competition and Markets Authority (CMA) published its report – Building a comprehensive and competitive electric vehicle charging sector that works for all drivers – outlining challenges to effective competition in the market in relation to rolling-out charging along motorways, in remote locations, and on-street. As a result, the CMA recommended a number of “targeted interventions” to “kickstart more investment and unlock competition”.

For chargepoints along motorways, where one chargepoint operator holds a market share of 80%, the CMA found that constraints on the capacity of the electricity grid and long-term exclusive contracts prevent entry by competitors at many sites. It recommended that the government use its commitment to fund upgrades to the grid as a means of opening up competition and facilitating market entry.

For on-street charging, the CMA highlighted that the roll-out is slow, and suggested that local monopolies could arise if the market is left unchecked. It recommended that local authorities play an active role in overseeing the market in their areas, and suggested that they could require fresh powers to ensure that they were adequately equipped to do so.

In response to these recommendations, the government has confirmed that it is considering regulatory changes with a view to enhancing competition in the sector. This includes considering requiring service area operators and large fuel retailers to tender charge point service contracts openly and have a minimum of two – and at some sites more than two – different charge point operators at any particular site. The Department for Transport has also suggested requiring existing providers of charge point services at motorway service areas to make their charge points open-access rather than available only to an exclusive network or group of networks or manufacturers. The Office for Zero Emission vehicles’ consultation on the Future of Transport regulatory review closed in November 2021, and its findings will feed into legislation which may feature in the next Queen’s Speech.

The regulatory environment for chargepoint providers is thus likely to evolve rapidly as the UK’s road charging network expands over the next few years. With changes likely to impact established players in the sector as well as providing potential means of market entry for challenger firms, investors will want to monitor these developments closely in evaluating opportunities for their target or portfolio companies.

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Decoding private equity’s video game spending spree

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More bang for our buck, please: the government wants more out of R&D tax credits

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Navigating the NSIA: which way for M&A?

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An historic opportunity…for more of the same? A look at post-Brexit procurement trends

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Solvency II reforms: a key Brexit win for the government?

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Politicians signal regulatory change on the horizon for IVF clinics

After a long period of stability, IVF policy is set for a shake up as a result of new regulatory proposals made recently by the Human Fertilisation and Embryology Authority (HFEA), the industry regulator. HFEA is looking to amend the Human Fertilisation and Embryology Act 2008 in a number of areas which would affect access and treatment types.

Scrutiny of IVF clinics has been growing over the past year. In June 2021, the Competition and Markets Authority (CMA) collaborated with the HFEA to develop new guidance which allows couples to initiate legal proceedings against IVF clinics that have falsely guaranteed their success rates. Following on from this, Julia Chain, the newly appointed Chair of HFEA, has called for far reaching changes to be made to current IVF regulations, which would allow HFEA to fine clinics that mislead patients over the efficacy of their treatments, as well as widen access to treatment. Chain has also called for IVF regulatory reform to allow scientists to use embryos for research beyond the present 14-day limit.

Chain has argued that IVF policy has become outdated, with reproductive regulations no longer matching the reality of treatment provided in the UK. She has highlighted several areas of the 2008 Act as being in need of reform, including patient protection and the means of maintaining the quality of care provided for them. Chain has called for a broader range of methods for addressing poor performance, such as economic sanctions against non-compliant clinics. This would also include addressing the increasing commercialisation of the fertility sector, where 65% of treatments are self-funded and public funding is unevenly distributed, resulting in a postcode lottery.

Political awareness of the discrepancy in NHS funding for fertility procedures has been growing. Under pressure from MPs across all parties, in September 2021 the then Care Minister Helen Whately MP announced that the government had conducted an internal review of variations in coverage and was currently considering its next steps.

This additional scrutiny substantially changes the political environment affecting IVF. Government reviews, the attentions of the CMA, a new activist Chair of the HFEA, as well as increased press coverage and ongoing legal cases will all increase the need for careful political due diligence of any investments in the sector. Demand for IVF services will remain high, and indeed is three times higher than it was in 1999, but investors will need to take the political and regulatory changes on the horizon into account as they plan their strategies and make their decisions.

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Building safety regulations: what to expect from the next phase of reforms

With the return of Parliament from its summer recess, the Building Safety Bill has entered its Committee Stage in the Commons. This marks the latest phase of the government’s plans for far-reaching reform of building regulations. The plans – born of the tragedy of the Grenfell Tower fire – are likely to result in a significantly different operating environment for the construction industry; investors in the sector will need to pay close attention to the proposals, and the changes are also likely to present a number of opportunities in related sectors.

The fire at the 24-storey Grenfell Tower on 14 June 2017 claimed the lives of 72 people, with dozens more seriously injured. Combustible cladding surrounding the building was found to have exacerbated the disaster, allowing the flames to spread and engulf the tower. As a result, the principal focus of the government’s funding initiatives to date has been to ensure the removal of both aluminium composite material (ACM) cladding and other combustible non-ACM claddings from high-risk buildings. £5 billion has been allocated to cladding-removal schemes, including:

At the Budget in March 2020, the government announced that it would provide £1 billion in 2020/21 – the Building Safety Fund – for the remediation of unsafe non-ACM cladding on residential buildings 18m tall and over, in both the private and social housing sectors.
On 10 February 2021, the government announced a further £3.5 billion to fund the cost of replacing unsafe cladding for all leaseholders in residential buildings 18m tall or more in England.

Buildings under 18m tall but over 11m, with a lower safety risk, have access to protection from the costs of cladding removal via long-term, low-interest, government-backed financing arrangements, which will see no leaseholder pay more than £50 per month for cladding removal works. Leaseholder groups have voiced their opposition to leaseholders being liable for the removal of cladding and – while the government has not indicated it will change its approach – it remains under considerable political pressure to do so.

The Hackitt review found widespread shortcomings in current building regulation

The Grenfell Tower disaster has also precipitated a comprehensive review of fire safety and building regulations, led by former Chair of the Health and Safety Executive (HSE) Dame Judith Hackitt. The recommendations of that review have formed the basis for the legislation which the government subsequently introduced.

The Hackitt review published its final report in May 2018, having found a “system failure” in the current regulatory regime. The report found that:

The roles and responsibilities of those procuring, designing, constructing and maintaining buildings were unclear;
The current suite of regulations and guidance (in the form of Approved Documents) were ambiguous and inconsistent;
The processes that drive compliance with building safety requirements were weak and complex, with poor record keeping and change control practices widespread;
Competence across the system was inconsistent;
The product testing, labelling and marketing regime was opaque and insufficient; and
The concerns of residents often went unheard, even when safety issues were identified.

As a result, the review recommended a new, overhauled regulatory framework, designed to be simpler, provide stronger and clearer oversight of dutyholders, and provide more robust means for residents to raise safety concerns than under the previous system. The review recommended that initial focus of this new regime be on multi-occupancy higher-risk residential buildings (HRRBs) or 10 storeys or more, and would include specific safety measures for each of the design, construction, occupation and refurbishment phases of a building’s life.

The Fire Safety Act has been approved by Parliament, but is not yet in force

As part of its efforts to implement the Hackitt review’s recommendations, the government introduced the Fire Safety Bill – amending the existing Regulatory Reform (Fire Safety) Order 2005 – in March 2020. The Bill passed into law on 29 April 2021 but is not yet in force.

The Act applies to all multi-occupancy residential buildings, regardless of their height, and introduces significant new obligations on those in control of multi-occupancy buildings. These “Responsible Persons” (RPs) will now have an obligation to “reduce” as well assess and manage fire risks, and risk assessments will now have to include the risks posed by the structure and external walls of the building, as well as by any individual doors opening on the common parts of the building. In seeking to make these new assessments, there may be increased demand from RPs from specialist fire-safety consultants. Businesses providing these services may represent an opportunity for investors.

The government has said that it will not enforce the Act until it has finalised comprehensive risk-based guidance to aid compliance. The considerable additional duties on RPSs will be accompanied by severe new penalties for non-compliance, with criminal prosecutions and unlimited fines possible in the most significant cases. RPs and investors in the space will therefore want to be very familiar with the guidance, which is likely to be published in the autumn.

The related Building Safety Bill is still before Parliament

The government published the Building Safety Bill in July 2021, having promised it in May’s Queen’s Speech. It will begin its Committee Stage in the Commons on 9 September 2021 and will likely pass into law in early 2023.

As in the case of the Fire Safety Act which it complements, the Building Safety Bill is set to introduce new obligations for the controllers of multi-occupancy builders, and provisions which will have a considerable impact on the sector. Chief among these provisions is the creation of a new regulator – the Building Safety Regulator – which will operate as a division of the HSE and have substantial enforcement and prosecutorial powers. This move represents a centralisation of oversight compared to the current regime, in which developers have been able to choose a local authority of an approved inspector for higher-risk buildings.

The Bill will introduce tougher sanctions for non-compliance. Directors or managers of companies responsible for high-rise residential blocks will be personally liable for safety failures, and the most serious cases will carry the potential for two-year prison sentences. Similarly, neglecting to register buildings with the new regulator, or failure to apply for a buildings assessment certificate when required could result in criminal actions.

Taking up a recommendation of the Hackitt review, the Bill will seek to introduce a “golden thread” of information and documentation sharing through new responsibilities to collaborate between all responsible parties from development to construction, to occupation, to refurbishment. Ensuring that the “golden thread” is comprehensive and robust is likely to require significant digital transformation and expansion activities; investors will want to pay close attention to specialist firms offering promising technologies in support of this goal, as these may present considerable growth opportunities.

The outlook for investors

The new regulations will entail significant changes for the building sector and, while the new regime is unlikely to come into force until next year at the earliest, investors will want to monitor the evolution of the government’s guidance over the next few months in order to ensure that portfolio or target companies remain fully compliant. The new regime also looks set to drive growth in related sectors – not least specialist safety consultants to meet new risk-assessment requirements and digital technologies to ensure reliable information sharing among responsible stakeholders. Investors should pay close attention to these areas to maximise their opportunities under a regime which, the government hopes, will ensure that the tragedies of 2017 are not repeated.

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The Competition and Markets Authority: new powers and new roles?

The article below was written by Pauline Guénot, a member of WA’s Investor Services practice.

The Covid-19 pandemic has had a profound impact on every part of the UK economy, and this has generated an ever-more complex raft of challenges to which the Competition and Markets Authority has had to respond. The watchdog has had to address, at short notice, new issues facing consumers and businesses in response to restrictions and new ways of working. It reported this year that its increased casework volume had gained “refunds for thousands of holidaymakers, secured landmark changes for leaseholders and given increased protection to people arranging funerals for loved ones”. As businesses and regulators begin to focus on the post-pandemic environment, attention has turned to ensuring that the CMA remains fit for purpose in the longer term.

Digital regulation post-pandemic

As the UK’s competition regulator, the CMA already has a wide-ranging role. Its powers include investigating mergers that may reduce competition, studying entire markets or sectors where consumer problems have arisen, and sanctioning businesses and individuals which it finds taking part in cartels or other anti-competitive practices. Proposals currently being considered by the government may expand and enhance its remit further.

Among the most significant proposals focus on digitisation. The pandemic has increased the CMA’s emphasis on digital markets, with consumers spending more and more time online. Since the beginning of 2021, it has targeted all but one of the Big Five tech giants, opening different investigations into suspected breaches of competition law in digital markets: into Amazon and Google over the numbers of fake reviews on their sites; into Facebook over its collection and use of advertising and single sign-on data; and into Apple and Google for their privacy settings.

In April 2021, the government launched a new digital regulator within the CMA, the Digital Markets Unit. It is initially operating in “shadow form”, on a non-statutory footing, but the government has committed to introducing legislation when parliamentary time allows to formalise its authority. The DMU will be responsible for overseeing the UK’s digital regulatory regime; it will have a duty to promote competition and innovation, holding powers to regulate, investigate and ensure compliance from digital firms. The government has launched a consultation that will remain open until October 2021 to seek external input on its proposals for the new regime. These include proposals that would designate companies with “substantial market power” as having “strategic market status”. Such companies would be subject to an enforceable code of conduct, and to potentially greater interventions in their M&A activities. Investors in such companies will want to monitor these developments closely to understand the precise implications on their portfolios.

New powers for the CMA

Alongside a focus on digital markets, the growth in the number and value of private equity funded buyouts in the UK more generally has spurred debate as to the CMA’s overall ability to protect consumers and employees.

There has been speculation over possible CMA interventions in a number of markets with a significant private-equity presence. Concerns about private equity interest in UK supermarkets including Morrisons and Asda, for example, prompted the chairman of the Business, Energy and Industrial Strategy Committee, Darren Jones MP (Labour, Bristol North West) to write to the CMA’s Chief Executive, Dr Andrea Coscelli, questioning whether it had “insufficient oversight or powers to intervene when new owners act irresponsibly”, particularly in relation to private-equity owned businesses acquiring significant debt.

Dr Coscelli’s response stated that the CMA’s statutory functions covered merger control and market studies/investigations, and that its powers of intervention on the basis that an asset is highly leveraged is very limited. He did, however, add that a study can be launched if the status of providers appears to affect the price and quality of their services, or their financial resilience. While this reply did not itself outline his stance on possible reform, the CMA has already suggested that a stronger and more flexible competition and consumer protection regime would make its work more efficient.

In July 2021, the government announced that enhancing the CMA’s powers to tackle anti-competition business practices was under consideration and opened the consultation “Reforming competition and consumer policy”. The government’s proposals would enable the CMA to conclude investigations faster and impose stronger penalties for non-compliance. Breach of consumer law could entail a fine of up to 10% of the firm’s turnover; civil fines could be given to businesses that refuse to collaborate or that give misleading information to the regulators and penalties could be imposed for companies that do not comply with the CMA’s investigations equating to up to 5% of annual turnover, plus daily penalties of up to 5% of daily turnover while any non-compliance goes on. The length of court processes would also be reduced as the CMA could accept binding, voluntary commitments from businesses at any stage of its investigations, aiming at delivering quicker results and lower costs.

While these proposals signal stronger powers for the CMA, the government has also proposed removing mergers between small businesses with a turnover of less than £10 million from the CMA’s control. The government envisages that this change will allow the CMA to focus its efforts on larger players, and it aligns with its desire to remove some of the bureaucracy within which smaller businesses must operate more widely. Dr Coscelli has welcomed this balanced approach suggesting that the plans “take forward many of the CMA’s suggestions for a swifter, stronger and more flexible competition and consumer protection regime, which will protect consumers and enable businesses to grow and thrive.”

The government consultation is open until 1 October 2021, and, while legislation is unlikely before 2022, investors will want to pay close attention to the development of the government’s approach and prepare their portfolios for any changes in the regulatory landscape, as well as to identify those areas which the government is most enthusiastic to see grow.

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The impact of Covid on international travel this summer and beyond

The article below was written by Pauline Guénot, a member of WA’s Investor Services practice.

While Prime Minister Boris Johnson declared that on 3 June there was “nothing in the data” to suggest a delay to the 21 June reopening target will be necessary, hopes of holidays abroad are still stymied by both testing and quarantine requirements, potentially jeopardising the recovery of the travel industry.

The UK is currently operating a three-tier “traffic light” system for international arrivals, which is reviewed every three weeks. Arrivals from countries in the red list require a 10-day hotel quarantine, while those from countries on the amber list are required to quarantine at home for 10 days and book tests for the second and eighth days. Arrivals from the green list – which presently includes only 12 territories – need not quarantine but are still required to take a test on the second day post-arrival.

Key barriers facing travellers

Ongoing restrictions to international travel will exacerbate the economic damage which the pandemic has done to the travel and aviation industry. According to the ONS, it has been the worst affected by the pandemic, with a fall to its lowest turnover rate in May 2020, at just 26% of February levels, compared with 73.6% in all other industries. The Minister responsible for tourism, Nigel Huddleston, has claimed that the government’s response to the travel industry crisis has been “immense” but, as yet, there is little sign of a sustained upswing in the industry’s fortunes, as the additional hassle Covid protocols entail continuing to deter travellers.

Firstly, the testing system has drawn criticism for its cost – up to £378 for the two tests for one individual. The government has been called upon to cap it to £50 by the Institute of Travel and Tourism, and to scrap the VAT on tests as a means of promoting the travel and aviation industry’s recovery. But the issues of testing go beyond cost. Private laboratories are already overwhelmed and travellers face delays in getting their results, demanding more flexibility around arrivals and departures. This problem is likely to be magnified if the green list is expanded in the coming months. Travel insurance has thus become a hot topic, and some travel companies might also offer packages including testing to ease travellers’ minds, like TUI which has partnered with Chronomics to offer the service from £20.

Industry experts have warned that summer holidays be thrown into further chaos by hours-long queues in airports created by onerous health checks at borders both upon arrival and departure. In response to lengthy waiting times, Heathrow Airport has pledge to lay on more staff and upgrade its passport e-gates, but such improvements will not be available until autumn 2021 at the earliest.

One of the key problems with the three tier “traffic light” system is that it cannot provide the certainty necessary to book holidays abroad very far in advance. The classification is guided by the analysis of factors including the country’s rate of infection, the prevalence of variants of concern, and the access to reliable scientific data and genomic sequencing. As a result, countries can move rapidly between the lists, in both directions; Portugal had only been added to the green list for a few weeks before being removed. The Nepal variant spreading in Europe is also currently making the headlines, threatening the green list’s expansion.

Towards a global understanding around Covid-19 certificates?

Before booking a trip to a country on the green list, British travellers must consider the entry requirements of their destinations, as well as the requirements for their arrival back in the UK.

The European Union has implemented a digital certificates system; travellers demonstrating vaccination, a recent negative PCR test or immunity from past infections are exempt from travel restrictions within the EU. If they succeed in reaching an agreement with the UK, British tourists could enjoy European trips as the continent’s restrictions are due to be lifted by the end of the month. Nevertheless, individual EU member states can still set their own rules when facing a deteriorating health situation or a new variant. For example, France and Austria recently tightened restrictions to prevent the Delta variant detected in India from spreading: a negative PCR test or a proof of vaccination is no longer sufficient to cross these borders. Over the summer, however, countries relying on tourism might not be so strict. Greece, Cyprus and Portugal are already open to British tourists, with Spain due to follow.

When it comes to crossing the Atlantic, the G7 summit taking place in London this month might answer that question. Boris Johnson will attempt to negotiate a quarantine-free air corridor with the US aiming at exempting vaccinated Americans from self-isolating upon arrival in the UK, in the hope of a reciprocal agreement for British citizens flying to the US. If he is successful, the current restrictions would be lifted in early July, allowing both British and American citizens to travel. However, the US administration has proven to be reluctant to lift the travel ban, arguing that prioritizing countries with a successful vaccination programme would send the wrong message to developing countries benefitting from the Covax scheme.

Holidaymakers must therefore remember that for travel to be possible, a reciprocal agreement between countries has to be reached. While Australia is on the UK’s green list, for example, limitations in place by the Australian government still prevents British nationals from landing on their territory. Furthermore, travel regulations are highlighting broader political motivations: the United Kingdom had to consider different variables, not least its hoped-for bilateral trade agreement, before placing India on the red list.

A digital and sustainable model of tourism ahead?

Electronic Covid passports along the lines of those currently operating in the EU might be the first illustration of a more digital model of tourism. As a result of Brexit, summer 2021 will be the last time that EU citizens will be able to travel to the UK with their identity cards (rather than their passports). Priti Patel confirmed that the new requirements would take effect from October onwards.

She also plans to introduce an Electronic Travel Authorization system, similar to the ESTA in the US. Also being considered by the EU, the ETA would see all visitors without a visa or immigration status charged a fee, and would be in place from 2025. As yet, the government has not given an indication of how much the system will cost each visitor.

A longer-term impact?

Ongoing restrictions and changeable regulatory requirements may mean that the travel industry does not recover to anything like 2019 levels of activity much before 2023, so pressures on the traditional approaches to mass-market tourism will remain even when the immediate trauma of the pandemic recedes. This may compound longer term trends of heightened environmental awareness about both the impact of air travel, and the impact of large numbers of visitors in potentially sensitive ecological areas.

Business travel will inevitably change as well, with virtual conferences becoming much more commonplace and, where necessary, longer trips blending work and leisure activities seen as the norm. Investors will want to pay close attention to such developments in order to stay ahead of what promises to be a rapidly evolving picture.

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How to take advantage of AI data-analysis tools in the financial sector

The article below was written by Pauline Guénot as part of her work experience placement with WA’s Investor Services practice.

According to a study published in 2017, over 50% of the activities currently undertaken in the global economy could be replaced by automation within the next 40 years. To some, this will be a startling estimate, but the Covid-19 pandemic has undoubtedly accelerated some trends for automation and catalysed the adoption of data-driven solutions.

With the availability of data continuing to expand, and ever more sophisticated analytical tools available, the financial sector is well placed to capitalise on the potential benefits offered by artificial intelligence.

Potential applications

The potential applications of AI are wide-ranging, and often rest on the ability of the methods to harvest, manipulate and analyse data beyond the capacity of traditional techniques. AI tools can, for instance, enable higher loan approval rates with fewer credit losses for lenders. Building accurate predictive models on the basis of large data sets can help banks to identify and assess borrowers considered “at-risk” of default like millennials or small business loan applicants. Such models naturally rely on the quality of their input data; the dataset must be large and representative enough to return accurate predictions.

AI could offer significant benefits to the industry given its capacity to improve anti-money laundering and anti-fraud detection management. The traditional risk documentation process is expensive and time-consuming, while an approach based on both pattern recognition and intelligence-based models could diminish the administrative burden. Ayasdi, a US-based predictive analytics platform, declared that one of its clients saw a 20% reduction in financial crime investigation cases after having used their services.

According to the UK Payment Markets Report 2020, while 58% of all payments in 2009 were in cash, this proportion was only 23% in 2019. Since the beginning of the pandemic, there has been a 60% decline in cash usage. With more and more transactions proceeding electronically, identifying fraud and other illegal activities with rapid, real-time techniques will become all the more important.

Potential risks

Whilst these techniques – implemented well – can reduce exposure to credit risk and increase confidence in the financial system, they undoubtedly come with their own risks. The most obvious is that poor input data will, almost certainly, yield poor results – the classic “garbage in, garbage out” refrain – and this is all the more relevant for AI techniques, which might be expected to proceed with comparatively less supervision than traditional methods. A further risk is that, if consumers learn how the model works, they may then seek to mimic “correct” behaviour to get a loan or achieve their objective under false pretences.

The current regulatory landscape and the future outlook

Given these risks, investors and financial services providers will want to take a close interest in a potentially changeable regulatory environment for AI.

Companies must build the right data partnerships to develop unique products, insights and experiences that differentiate them from their competitors. However, big tech companies remain critical sources of data and customer experience. As they anchor their financial value, smaller firms are left at a disadvantage. Earlier this month, the government announced the launch of a new regulator, the Digital Markets Unit, based in the Competition and Markets Authority to enforce a “new pro-competition regime to cover platforms with considerable market power”. Companies such as Google or Facebook, designated as having “strategic market status” and funded by digital advertising, will be monitored by regulators.

Financial firms could use alternative data, as mentioned during the second Artificial Intelligence Public Private Forum last March, but they must have clear due diligence processes to ensure that data is still from a trusted source. Financial services can also find inspiration in data standards developed in the open banking regime to apply existing data standards to AI. They must align with existing requirements like the European Banking Authority’s guideline on outsourcing, ensuring that their system is transparent and explainable.

The government has finally announced that “a new plan to make the UK a global centre for the development, commercialization and adoption of responsible AI will be published this year”, as AI could deliver a 10% increase in UK GDP in 2030. The European Commission will also propose new EU regulations on AI on 21 April 2021. Embracing Artificial Intelligence is therefore a priority for financial firms, but the prospect of reforms means that they must monitor it to ensure continuity of services globally.

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An enduring bond? The outlook for US investors in the UK

Introduction

The United States is the United Kingdom’s single biggest source of foreign direct investment, and this relationship is growing. US FDI in the UK was $851.4bn in 2019, a 6.9% increase on 2018. The Covid-19 pandemic has, naturally, stalled that trend somewhat; the total number of private equity investments in the UK fell by 17% in the first half of 2020 on the same period last year. However, much of this downturn can be attributed to the caution of domestic investors, and there is still a clear appetite from foreign investors for UK assets. The market share of private equity investments in the UK from the US grew by 5% to 25% in the first half of 2020 in terms of the number of deals. At the same time, the rest of the world accounted for 17%, up from 14%.

The UK’s exit from the European Union could represent a significant opportunity for US investors and has the potential to boost their appetite for the UK yet further. Below, we examine some of the factors which investors are likely to consider when deciding to invest in the UK.

A natural second home?

Much is made of the Special Relationship between the UK and the US on the geopolitical stage, but the ties between the two countries run deep on the business and even the personal level, too. The UK and the US both employ a million of each other’s citizens. They share many cultural and business norms. They share a language. It is clear that they hold one another in high regard. Indeed, a survey conducted by the British Council in 2018 found that 69% of Americans rated the UK as a “global power”, placing it above all other countries except China. The UK also topped the respondents’ rankings for the most attractive places to study and, crucially, for the top partners for trade and business.

These ties – not to mention the UK’s favourable time zone between the Americas and Asia – have long made the UK an attractive base for investors seeking to expand into international markets. But the UK market itself is seen as an attractive one in which to do business. A number of surveys of market leaders have highlighted the value which investors place on the UK’s perceived pro-business environment, its transparent regulatory regime, its adaptable labour market and its stable political institutions.

These sentiments were echoed in the World Economic Forum’s Global Competitiveness Report for 2019. The UK ranked ninth globally for its competitiveness, with Singapore first and the US second. The UK scored particularly highly for its macroeconomic stability (achieving a maximum score of 100), for the strength of its infrastructure and for its highly-developed financial system. While the WEF paused its rankings for 2020 as a result of the pandemic, its “special edition” for 2020 suggested that the UK was well placed for the post-Covid recovery, particularly in terms of trust in its institutions and in rethinking labour regulations to meet the needs of the post-pandemic economy.

Relatedly, London remains by a considerable margin the most competitive financial centre in Europe according to the Global Financial Centres Index. As of March 2021, London ranks second in the Index, behind New York, with which it last traded places in 2018. For comparison, the best performing other European centres, Zurich and Frankfurt, rank ninth and tenth respectively.

The impact of Brexit

For any who have followed the machinations of the UK’s Brexit negotiations closely, it may seem somewhat counterintuitive to see the WEF rank its “stability” so highly. The political uncertainty which Brexit has caused has undoubtedly had an impact on investment decisions. Coupled with the Covid-19 pandemic taking up so much government time, recent years have seen short-term responses often come at the expense of long-term planning.

A longer-term view, however, is likely to be the more important focus for many US private equity investors than any current uncertainties and, in this context, the signs appear positive. Post-Brexit, many of the inherent advantages of the UK for US investors will remain. The UK will maintain its pro-business environment, its skilled labour force, its stable institutions, and all of these will weigh in its favour.

Indeed, Brexit does not appear to have had a significant negative impact on UK-US M&A activities, which have remained robust despite turbulent political times. While 2018/19 saw an overall global decline in both domestic and cross-border M&A activity by around 30% on 2016 levels, US investors have continued to demonstrate a clear appetite for the UK over other European destinations. Of the 333 total “inbound” deals (by US investors in Europe) in 2018, for example, 119 were in the UK, representing more than the total for France, Germany, Italy, Spain and Switzerland combined.

Technology and the UK’s traditional strengths in technological areas are likely to be key drivers in sustaining this appetite. Some 38% of UK-US M&A deal activity has been in the technology sector over recent years, with large firms like Microsoft, Salesforce and Oracle among the most active acquirers. This priority for investors aligns closely with the ambitions of the UK government. Tech skills have been identified as a clear priority by the government as part of its commitment to make the UK a “scientific superpower” with its Research and Development Roadmap, increasing R&D spending and encouraging top talent from around the world to make the UK their destination of choice.

Added to these continuing attractors, the UK’s departure from the EU presents opportunities for the UK and the US to strengthen their commercial relationship. A full UK-US trade agreement is still some time away but – as evidenced by the fact that the Prime Minister was the first European leader to receive a call from President Biden – there is an enduring appetite for close and mutually beneficial co-operation. Similarly, Trade Secretary Liz Truss and the new US Trade Representative Katherine Tai spoke in March with a view to accelerating the trade agreement process and highlighting “the importance of continuing to work together to build a closer economic relationship.”

Investors will want to monitor the details of this evolving relationship very closely, as there may be scope for incremental agreements – including, for instance, mutual recognition of professional qualifications – before a “full” free trade agreement is signed.

Of course, the benefits for building closer UK-US relationships may be rather offset in the minds of US investors if there are significant UK-EU barriers as a result of Brexit. Such obstacles could make the UK a somewhat counterintuitive prospect as a base for building pan-European operations, as compared to, say, Frankfurt or Paris. However, continuing agreements between the UK and the EU to lower commercial barriers (including an agreement on continued data sharing signed in February and a Memorandum of Understanding for co-operation in financial services to be signed shortly) are likely to help the UK remain a natural second home for US investors seeking European opportunities. As for the emerging UK-US agreements, investors will want to take a close interest in the recalibration of the UK-EU relationship as part of their decision-making process over the next few years.

The opportunity for investors

The UK’s emerging from both the pandemic and the political uncertainty of its Brexit negotiations represents an important opportunity for US investors. The UK will continue to be a stable, transparent, pro-business environment, with a convenient time zone and no language barrier. The UK government has also placed attracting foreign investment and talent alongside future-proofing the skills of its domestic labour force high on its agenda.

A full UK-US trade agreement may still be some way off, but the mood on both sides of the Atlantic for closer ties and increased co-operation could well see interim agreements and approaches put in place before then. US investors will want to pay close attention these developments if they are to take advantage of what could be a stronger and highly profitable renewed relationship.

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Hell’s kitchen or a smorgasbord of delights? Is now the time to invest in hospitality, retail and leisure

For industries not normally put under high levels of regulation, the hospitality, retail and leisure sectors have felt the heavy hand of the government since Coronavirus restrictions were first introduced in the UK. This has sent the valuations for many businesses tumbling. However, this means now could be the time for private equity investment from those who have a handle on where restrictions, and government support, are heading and are prepared to weather the short-term storm.

What’s the outlook for reopening?

The government has set a target of getting the most vulnerable vaccinated by mid-February. Whilst some optimists think this could mean a return to normal by early March (when limited immunity from the first dose will start to take effect), a full reopening is unlikely then. The ultimate test for whether high street venues can reopen is whether cases, hospitalisations and deaths have come down, perhaps even close to zero. It will take some time for vaccinations to have this effect. Limited reopening might be expected in the spring, but a return to ‘normal’ shouldn’t be expected before the summer. Those premises which can survive will then likely reap the reward of pent up demand from a populace desperate for release.

What government support is available in the meantime?

The government has launched numerous schemes to aid this survival. The latest is a grant scheme for hospitality, retail, and leisure premises forced to close during the current national lockdown, worth up to £9,000 per property.

This follows loan schemes designed to provide cheap credit, including the Bounce-Back Loan Scheme, the Coronavirus Business Loan Scheme (CBILS) and the Coronavirus Large Business Loan Scheme (CLBILS). The loan schemes close to new applications on 31^st March.

Furlough has also helped businesses retain staff and so avoid training and recruitment costs once restrictions are eased. The current furlough scheme ends on 30^th April.

Alongside these wider measures, hospitality and leisure have benefitted from a 5% cut in VAT from 15^th July 2020. This has now been extended until 31^st March 2021. Hospitality, retail and leisure properties will also benefit from not having to pay business rates for the 2020/21 tax year.

With all these schemes soon coming to an end, what’s next?

The Treasury was hoping the need for business support would end in the spring, but this seems increasingly improbable as restrictions are unlikely to be lifted completely and we will see knock on effects of the crisis on spending through reduced income due to job losses.

Nevertheless, Sunak will hope to bring in less generous support, as he is increasingly showing a tendency to fiscal conservatism, as demonstrated by the fact that the November spending review saw a £10bn cut to non-Covid government expenditure. Thus, the March Budget will likely see a less generous replacement for the furlough scheme. This may be along the lines of the scrapped Winter Economy Plan, where workers were to be required to work at least part-time. There may also be an extension of loan schemes, depending on the severity of the restrictions still in place, as the government will want businesses to survive the home straight to reopening.

Large question marks remain over the likelihood of extensions to the VAT cut and the business rates relief. Sunak has spoken often about the need to repair the public finances. Any business rate relief extension for a short period would also be logistically complicated as it would require different rates to be applied for different parts of the 2021/22 tax year. Therefore, if the vaccination programme is on track, Sunak may make use of the Budget on 3^rd March 2021 to start a return to a more normal fiscal programme, reining in his generosity to businesses.

In all, March will likely see a winding down of support from an anxious Chancellor, but some support is likely to be extended to avoid businesses going bust just before the storm passes.

Longer-term: the business rates review

Alongside these short-term measures, the government is conducting a fundamental review of business rates, due to conclude in spring 2021. The review is set to consider, among other things, how premises are valued for the charging of business rates, the effectiveness of business rates and alternatives to it, and who gets relief from business rates. The review is a chance for the government to level the playing field between online and high-street retailers as well as boost the long-term recovery from coronavirus across high-street sectors. However, with the main beneficiaries of business rates, local governments, already strapped for cash, the Treasury will be wary of giving too much away.

Great uncertainty, but also great opportunity, lie ahead for investors in hospitality, retail and leisure. As we head into the spring, savvy investors must consider the challenges presented to the sectors by policy in a way they might not have done previously; something which WA has the experience to help with.

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Sustainable returns? Trends to look out for in ESG in 2021

Introduction

Evaluating investments on the basis of environmental, social and corporate governance (ESG) principles has been one of the most visible trends in the investment industry over the last few years. A far cry from the familiar, straightforward screening of traditional “sin stocks”, investors are increasingly demanding a much deeper read of a company’s ESG procedures – from staff welfare and internal governance to supply-chain risk and climate action – in order to assess the sustainability of their returns.

Across the world, the proportion of investors applying ESG principles to at least a quarter of their portfolios has risen sharply from 48% in 2017 to 75% in 2019. The Covid-19 pandemic has brought questions of sustainability to the fore, and looks set to reinforce the trend towards greater awareness and uptake of ESG principles. An estimated 200 new funds in the United States with an ESG investment mandate are expected to launch over the next three years, more than doubling the activity from the previous three years. ESG-mandated assets could grow almost three times as fast as their non-ESG counterparts in the coming years, so that they make up half of all professionally-managed investments by 2025.

This growing trend represents a clear opportunity for investors, yet the consensus of a number of studies and surveys is that the significant variety of approaches to ESG incorporation by investment management firms, regulators, and investors means that its full potential is not being realised. Below, we assess some of the key issues which investors will want to bear in mind when formulating their strategies.

Changing regulatory environments

Over 170 ESG-related regulatory measures have been proposed globally since 2018. This marked increase (it is more than the number of proposals from 2012 to 2018 combined) is a measure of the pace of change in this area and the level of regulatory focus upon it.

The traditional approach in the US, for instance, has been the SEC’s principles-based approach to company disclosure, which applies equally to ESG-disclosures as non-ESG. There, are, however, increasing calls for a more prescriptive approach for ESG, along more “European” lines.

In the EU, sustainability risk has been integrated into MiFID II, AIFMD and the UCITS framework. The changes will dictate how market participants and financial advisors must integrate ESG risks and opportunities in their processes as part of their duty to act in the best interest of clients. It is small wonder, therefore, that 97% of European institutional investors now say that they interested in ESG investments.

The UK is expected to retain an approach similar to that of the EU after Brexit. In December 2020, for instance, the FCA set out proposals to promote better disclosures on climate risk from premium-listed companies and will publish a consultation paper in early 2021 with a view to widening the scope of these measures. The Government is due to consult on measures in the Taskforce on Climate-related Financial Disclosures framework, which would oblige large listed and private companies to disclose the risks to their businesses from climate change. Influential investors have also urged the Government to consult on the idea of introducing mandatory “say on climate” votes for shareholders at AGMs, somewhat akin to “say on pay” votes.

Whilst different regulators have taken different approaches, the overall trend is for more stringent ESG disclosure requirements, with ESG more firmly integrated into the investment advisory and decision-making process. International frameworks, including that drawn up by the Sustainability Accounting Standards Board (SASB) are gaining influence in developing consistency in ESG reporting across companies. Indeed, many companies have already identified the value placed on ESG transparency by investors, and are using these frameworks for reporting and disclosure which goes beyond the requirements set by regulators.

The role of technology

As the amount of ESG data available to investors has increased, so too has demand for analysing it. Spending on ESG content and indices rose by almost 50% between 2018 and 2020, indicating the scale of growth in the field.

The trend has been for investment management firms increasingly to develop their own capacity for gathering and processing data, but emerging technologies including Artificial Intelligence are likely to hold the key to extracting material ESG insights as the volume of data increases. AI engines can, for instance, be used to sift through unstructured data – which may not have formed part of a company’s formal disclosure – with a view to uncovering further material information. Such tools are potentially very powerful, but investors and investment managers would do well to keep an eye on the potential for regulation in this area, given the creation of the Centre for Data Ethics and Innovation in the UK and the EU’s forthcoming legislative proposals on AI.

Emerging technologies also have a large role to play in addressing environmental questions – and are thus a significant contributor to the “E” in “ESG”. Here, again, AI is an important field – with promising applications from energy monitoring and control systems to automation in agricultural production. Alongside it sit emerging technologies in energy generation, including carbon capture, small modular reactors and nuclear fusion.

The impact of Covid-19 on ESG trends

The ongoing coronavirus pandemic has had a profound effect across the economy, with Governments playing much more interventionist roles in economic affairs than they might have envisaged pre-pandemic. The UK Government has spent almost £300bn on coronavirus measures, and the EU has agreed its €750bn Recovery Fund. Recovery plans unveiled to date – whether the UK’s Ten Point Plan or the EU’s Green Deal – have set clear ESG priorities and could, therefore, represent significant opportunities in sectors including clean energy, building technology and electric vehicles. In addition, an increase in demand for hygiene and diagnostic technologies may be a boost to the life sciences sector.

The logistical challenges which the pandemic has presented to many firms may bring about a renewed focus on supply-chain risk. Faced with a sudden shock, the vulnerabilities of many widely-dispersed supply chains were exposed, and this may galvanise efforts by companies to “reshore” some elements of production. To achieve this will likely require greater spending on advanced technologies including AI and robotics if moving production necessitates a move away from low-cost manufacturing elsewhere.

Perhaps the most obvious post-pandemic trend is the move towards remote working and digital commerce. For many, these have become embedded into daily life and will doubtless have long-standing social implications well into the future.

The opportunity for investors

The trend towards ESG investing is here to stay. It is an area of intense regulatory focus and the pandemic has heightened interest further still.

This growth represents a substantial opportunity for investors who can fully integrate ESG principles into their investment process. Such integration is likely to go beyond a mechanical exercise in completing an ESG “checklist”. Rather, it is likely to be a robust, thorough due-diligence process, illuminating past sustainability risks and providing a real picture of how target companies conduct their operations. Using the ever-increasing amounts of available data, and the evermore sophisticated technologies available to harness them, investors can gain deeper insights into their target and portfolio companies than ever before, and have the opportunity to generate genuinely sustainable returns.

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Private equity – How to win friends and talk to government

Benjamin Franklin said: “It takes many good deeds to build a good reputation, and only one bad one to lose it.” There is truth in this for the private equity industry; much of its socially valuable contributions go largely unnoticed while its missteps are widely publicised and serve to tarnish the sector’s reputation. One need look no further than the Financial Times or The Telegraph (two publications not known for their hostility to free enterprise) to see regular criticism of private equity and the way it does business, especially its leveraged approach to buy-outs.

A recent Due Diligence column in the FT is a classic of the genre, setting out the regular critique of private equity in a discussion of the potential sale of The AA: “they buy companies, leverage them up, pay themselves juicy dividends and leave their targets over-indebted and far too vulnerable to the slightest shock, with little room for error.” Despite this somewhat crude account of private equity business practices, it has had cut through into the political sphere – although more so in the US than the UK. But where the US goes, the UK quickly follows.

Political criticism

In the United States, Senator and former presidential hopeful Elizabeth Warren last year set out her Stop Wall Street Looting Act 2019, which squarely took aim at the private equity sector and many of its business practices. Included in the Act were 100% taxes on monitoring and transaction fees and bans on dividends for two years after a transaction, as well as forcing PE funds to share responsibility and liability for a target company’s debt and closing loopholes on carried interest. While the Act was not passed into law, the fact a serious presidential candidate proposed an all-out assault on the private equity industry demonstrates the strength of feeling with US politics.

In the UK, there has been little criticism of private equity from mainstream politicians, but Covid-19 and the increased scrutiny of businesses that will accompany the economic recovery could change this. In February of this year, criticism of private equity came from an unlikely source in the form of Guy Hands, founder of Terra Firma. Speaking at a conference on alternative investments, Hands claimed the industry was too insular and said that rather than caring about improving companies and creating jobs, instead “We tended to only talk about ourselves – the funds we raised and the pay cheques received.”

One might think if private equity has friends like these, who needs enemies? Fortunately for the sector, it does not have any high profile political detractors in the UK, yet, and crucially, private equity does have some friends within government. When it emerged that private equity-backed firms would be excluded from the CBILS and CLBILS schemes because their leveraged financial structures meant they fell foul of EU state aid rules, HM Treasury lobbied hard for exemptions for private equity-backed firms. Despite the Treasury being largely unsuccessful (exemptions were granted for smaller firms), its efforts show there are those in government who understand the value of private equity to the economy.

Managing the problem

To a large extent, private equity’s wider reputation problem is the result of availability bias. People, including politicians and policymakers, have a tendency to think that issues that come easily to mind occur more frequently than they do in reality. Private equity only makes it into the mainstream news following a high-profile business failure (often a distressed asset to begin with), while its successes are buried in trade publications or celebrated at industry awards evenings. As such, when influential people from outside the world of private equity come to form their views, they are much more likely to take a dim view of the sector as these negative stories come to mind much more easily.

Fortunately, private equity still has the opportunity to change this perception. With a significant number of businesses requiring injections of equity, and private equity sitting on a large amount of dry powder, the industry can play a key role in ensuring that many businesses can survive the downturn and become profitable once again. However, there is a risk this type of action could be branded as ‘vulture capitalism’ with private equity firms charged with sweeping up assets when they have no choice but to sell.

To mitigate this risk and demonstrate the value of private equity to the wider economy, private equity needs to make its case to government that it is a force for good. At a fundamental level, this would involve making clear to MPs and those within government what private equity brings to the table and the motivations behind its business model. Beyond this, the industry should explain to decisionmakers the vital contribution private equity has made to economic growth and building British businesses, and that the sector is responsible for the employment of millions of people. As the economic crisis begins to bite, private equity can use its resources and position to recalibrate its reputation. But it will have to do this quickly; a failure to get on the front foot is only likely to result in a solidifying of the sector’s already mixed reputation.

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Distressed hospitality: What investors need to be thinking about

With high street names such as Café Rouge and Byron Burgers entering administration, investors will be weighing up their options and trying to understand whether there are bargains to be had.

High street restaurant chains were competing in a crowded market before the onset of the Covid crisis, and lockdown has tipped a number of firms into the red as they’ve struggled to access government support schemes. Over the long-term, investors will need to consider the extent to which the public’s appetite for high street casual dining will remain, particularly given the prospect of social distancing measures continuing for many months to come.

More immediately, there are three areas where government decision-making will have a significant impact on hospitality assets, which will need to be factored into commercial decision making by investors.

Commercial rents

Commercial rents continue to be a problem for hospitality assets, with lease agreements no longer reflecting the value properties operating under social distancing conditions. Many businesses have taken advantage on the government’s moratorium on commercial evictions and have been able to defer paying their rent, but this will no longer be a possibility from 1 October 2020 when the moratorium ends. From this date, businesses will either have to renegotiate their tenancies with landlords or start paying again if they don’t want to face eviction or winding-up petitions.

Further government interventions on the issue of commercial rents are likely, and it is one of HM Treasury’s top priorities, with Treasury officials especially concerned about wider contagion to the financial sector should the issue of firms not being able to pay their rent not be resolved. Options for the government include a subsidy scheme proposed by the British Property Federation and the British Retail Consortium. The Furloughed Space Grant Scheme would involve government grants to cover fixed property costs, with the level of subsidy determined by the fall in turnover experienced by a business. Action from the government in this area could be a massive boost to potential investors, as commercial rents are a significant burden for hospitality assets. It will need careful balancing by the government, but any reforms could be enough to put high street restaurants back investors’ menus.

Short-term measures

With Rishi Sunak set to make an economic statement tomorrow, measures to support the hospitality sector are likely to feature heavily in his attempt to kick-start the economy.

The government is increasingly concerned with protecting jobs as the furlough scheme is wound down and will be keen to save as many of the 3.2 million jobs in the hospitality sector as possible. Short-term measures could include a reduced rate of VAT for the hospitality sector as a means of stimulating demand, as well as a possible further extension to the business rates holiday for hospitality firms that is set to run until the end of the financial year in 2021.

Interventions of this kind will certainly be welcomed by the sector, and any reduction in operating costs will help stabilise a number of businesses. However, the big question mark for government is whether they are enough to persuade consumers who are concerned about the virus to venture out of their homes and start spending again. It could be that measures such as a VAT cut only end up helping customers who would have spent anyway, making little difference to overall demand and causing the government to miss out on much-needed tax revenue.

Longer-term support

Beyond the Chancellor’s economic statement, the government will carefully monitor the economic performance of hospitality businesses, and further economic support could be forthcoming in the autumn Budget should it be required.

This additional help could be in the form of reduced employer’s National Insurance Contributions or through wage subsidies for younger workers to help in the battle against unemployment. The government has won plaudits for its commitment to the economy since the start of the crisis, and investors may want to gamble that the Chancellor’s cheque book stays open. Going on the government’s actions so far, this might be a sound bet, but investors will have to judge carefully whether purchasing a hospitality asset is only viable if the government continues to offer the industry financial support.

Investors looking to get a taste of the hospitality sector face an unenviable task. Not only will they have to make a long-term prediction about consumer attitudes towards high street casual dining (during a pandemic), but also consider the extent to which the government will continue supporting the sector.

However, investors who take the plunge could get their just deserts. The market will undergo a long overdue natural thinning over the rest of the year and beyond and firms that can embrace new revenue streams such as online ordering and delivery could stake out a sustainable position on the UK’s high streets.

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Archive for the ‘Private Equity’ Category

The bio-boom

The green rush

Though it may seem ripe for the picking, investors with an interest in the UK food and drink market should be mindful of navigating regulatory and policy changes in this space.

Nevertheless, the UK food and drink market is clearly at a fork in the road.

Saving today, but more spending likely in the autumn

Charting a low-tax course

No un-funded tax cuts

Capital: options to drive more investment

People: promoting lifelong learning

Ideas: more R&D required

Where’s the green agenda?

What does this mean for companies seeking to influence the Treasury?

Stimulating investment in charging infrastructure is seen as a priority for regulators and the government

Concerns over competition in the charging sector are likely to inform the government’s approach to regulation as the sector expands

The Hackitt review found widespread shortcomings in current building regulation

The Fire Safety Act has been approved by Parliament, but is not yet in force

The related Building Safety Bill is still before Parliament

The outlook for investors

Digital regulation post-pandemic

New powers for the CMA

Key barriers facing travellers

Towards a global understanding around Covid-19 certificates?

A digital and sustainable model of tourism ahead?

A longer-term impact?

Potential applications

Potential risks

The current regulatory landscape and the future outlook

Introduction

A natural second home?

The impact of Brexit

The opportunity for investors

Political criticism

Managing the problem

Commercial rents

Short-term measures

Longer-term support

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