E-scooters at a crossroads
E-scooters at a crossroads

Archive for the ‘WA Investor Services’ Category

IVF – what to expect when you’re expecting returns

A recent World Health Organisation report finds that about one in six people worldwide experiences infertility. Unsurprising, then, that this year would-be parents around the world will spend an estimated £12.8bn on fertility treatments, a figure growing at an annual rate of 10.3%. The UK IVF market – valued at around £420 million in 2018 – is expected to reach £760 million by 2026.

WHO officials highlight that IVF remains “underfunded and inaccessible to many due to high costs, social stigma and limited availability”. In the UK, IVF is provided through a mix of NHS and private services, and regulated through the Human Fertilisation and Embryology Act, passed in 1990. The Act has been updated only once, in 2008, despite the sector having witnessed scientific breakthroughs and an accompanying shift in public perception in the time since. Both factors have contributed to a significant growth in demand. As attitudes and access to IVF have evolved, sector stakeholders have started to highlight issues: regional variations in NHS funding, poor regulation of treatment ‘add-ons’ and perceived profiteering.

Although the National Institute for Health and Care Excellence (NICE) recommends three cycles of IVF for women under 40, some Integrated Care Boards offer only one cycle, or only offer NHS-funded IVF in exceptional circumstances. In the absence of national standardisation, and at a time of squeezed public sector budgets, the recent years have seen a steady decline in the number of IVF cycles funded by the NHS. Data shows that NHS-funded cycles in England fell from 40% in 2014 to 32% in 2019. In Wales, they fell from 42% to 39% over the same period, and in Northern Ireland they fell from 50% to 34%. Scotland is the only devolved nation to have seen an increase in the proportion of IVF cycles funded by the NHS, up from 58% to 62%.

Reflecting these developments, IVF has attracted media and political interest, with MPs from across the political spectrum becoming more vocal about the issues in the sector.

Launched in Summer 2022, the Government’s Women’s Health Strategy acknowledged the need for action and announced NICE would be updating its guidelines on fertility, with changes expected to be published in November 2024. The strategy removed the requirements for same-sex female couples to self-fund fertility treatment before becoming eligible for NHS-funded care and committed to exploring the possibility of publishing data nationally on IVF provision and availability. Several Labour MPs, including senior Shadow Cabinet members, have criticised the strategy for failing to get to the heart of the problem, claiming that increased transparency around available funding doesn’t do anything in improving provision or tackling the postcode lottery for fertility services.

According to HFEA, in 2019 the average birth rate per embryo transferred (IVF attempt success rate) was 24%. It comes as no shock that would-be parents have increasingly been opting for add-on treatments in hopes of improving their chances of conception. Add-on procedures are optional extras that are offered by clinics on top of normal fertility treatments. There is currently little direct evidence that add-ons, which can add up to £2,500 to the cost of each attempt, improve the chances of success. In the absence of available evidence, and the growth in demand for add-ons, in June 2021 the Competition and Markets Authority issued guidance for fertility clinics to ensure they don’t mis-sell add on treatments. Still, HFEA’s 2022 National Patient Survey found only 46% of people who used add-on treatments felt their clinic has clearly explained how likely the add-on was to increase their chance of conceiving. This debate is part of the reason why HFEA has been calling for reforms to the Human Fertilisation and Embryology Act for years.

It was only earlier this year that the Government asked the independent fertility regulator to submit reform recommendations for consideration. Now HFEA is seeking additional powers to enforce standards, including the ability to introduce economic sanctions on non-compliant providers. The lack of control over fertility treatment add-ons by HFEA have enhanced the criticism of the poor regulation and fuelled the ‘profiteering’ debate.

Given the mounting scrutiny, increasing size of the sector and the fact that the Women’s Health Strategy had already set out that government would consider changes to regulatory powers to cover fertility treatment ‘add-ons’, it is likely HFEA’s recommendations will be accepted. Even if parliamentary time is squeezed, and the Government doesn’t make progress ahead of a General Election expected in late 2024, women’s health will be high on Labour’s agenda should it form the next government.

Labour MPs have been vocal on a number of women’s health issues, with menopause awareness in the workplace being the most recent example. And with the Shadow Secretary of State for Women and Equalities, Anneliese Dodds, calling for a “national conversation” on women’s health and wellbeing, it is safe to assume Labour would take a more interventionist approach in government.

With 3.5 million people struggling to conceive in the UK, and the proportion of IVF cycles provided by the NHS steadily declining, private provision of IVF remains a growth industry. Considering the WHO’s recent findings and calls for better policies and public financing, the regulatory landscape is likely to tighten, so those looking to invest in the sector will need to keep an eye on both regulatory reform and updates to NICE fertility guidelines. The policy agenda of a potential Labour government, which is more likely to scrutinise profit-making delivery models in the health space, should also be a key consideration.

However, tighter regulation needn’t be discouraging, especially if it is followed up with better public financing. As we have seen in other sectors, if done well it is likely to build confidence and present growth opportunities for high quality providers committed to doing their best for patients. And that should motivate investors to drive the innovation that will deliver better outcomes for patients – and reward all expecting stakeholders in the long run.

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The Labour Party and Carried Interest – why does it matter?

Carried interest. What does it mean? Why does it matter? If you know the answers to those questions, feel free to skip a couple of paragraphs. But for everyone else, carried interest sounds so opaque that it couldn’t possibly be of any interest (excuse the pun). So why does the Labour Party keep going on about it?

Whenever you hear Sir Keir Starmer or Rachel Reeves talking about the economy, chances are they’ll mention carried interest. Not usually by name – that would be too direct for politicians – but in more generic language. Official Labour Party documents talk about “closing tax loopholes for private equity fund managers.” Reeves claims that “private equity bosses say that their income is capital gains…we would close that loophole.”

These are all references to carried interest. But what is carried interest?

It’s more straightforward than it sounds.

After the return of capital to investors, private equity fund managers typically receive 20% of a fund’s overall profits as payment for sponsoring and managing that fund. So far so simple. The controversy arises because private equity managers only pay capital gains tax (a rate up to 28%) not income tax (a rate of up to 45%) on carried interest. The majority of countries where PE is well-developed have a favourable tax regime for carried interest.

Many will argue there is good reason for this. The profits of private equity funds come from the sale of assets. It is reasonable that they attract capital gains tax. Others argue that a fund’s profits basically amount to income for private equity managers and should be taxed as such. Labour is clear about which side of the argument it supports. Reeves has claimed that taxing carried interest as capital gains is “absurd” and gives “tax breaks for fund managers averaging £170,000…as they asset strip some of our most valued businesses.”

That doesn’t sound like the basis for a great relationship between Labour and the private equity sector. But the Labour Party is not alone in calling for a change. A similar debate has been raging in the United States, where carried interest is also taxed as capital gains. Initial drafts of the Inflation Reduction Act would have required fund managers to hold an asset for five years before receiving the advantageous tax rate. The Senate Democrats argued this would raise $14 billion over 10 years – a relatively modest revenue-raiser in the context of the US economy. But according to Senate Majority Leader Chuck Schumer, the Act would also ensure “the wealthiest corporations and individuals pay a fairer share in taxes”. A political rather than economic motive.

Back in the UK, the Labour Party is trying desperately to appear pro-business. In a speech to the CBI in November, Starmer said that Labour Party was “not just a pro-business party but a party that is proud of being pro-business.” So why the attack on private equity? As in the United States, the money raised from changing the tax rules on carried interest would bring in relatively little – around £440 million a year. Which means, as in the United States, the motive can’t be primarily economic. It must be political.

This is because Labour is eager to appear pro-business in order to gain economic credibility, but it isn’t afraid of criticising business when it’s politically expedient to do so. And those sectors of which the public may have a less positive impression – such as private equity – are first in the firing line. By pitting wealthy financiers, whom Labour argues are avoiding tax, against ordinary working people who pay their fair share, Labour aims to present itself as the party of economic justice. Redistributing wealth from a small number of financial elites to support the greater mass of ordinary people.

In other words, the Labour Party is looking to get the keys to Downing Street and will do whatever it can to appeal to voters (as all political parties aspiring to government should do). It believes that increasing tax on carried interest and bashing financiers will achieve this. Which means that carried interest, as niche and as dull as the term may sound, is actually rather interesting, particularly as a microcosm of Labour’s economic approach in the round.

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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 21st 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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The Great Unretirement

In January, the Chancellor, Jeremy Hunt, called on retirees to return to the workforce after a House of Lords committee report showed that early retirement is the biggest driver of labour shortages in the UK.

The Lords Economic Affairs Committee’s Where have all the workers gone? report, published following an inquiry into the UK’s labour supply, concluded that there are four main drivers of shortages in the labour market: increased sickness; early retirement, changes in migration trends; and an ageing UK population.

Hunt has urged older people to return to the workforce, and is reportedly working on a “back-to-work Budget” in response to concerns about the large number of people aged 50-64 who have left the workforce.

It is widely accepted by both politicians and economists that rising economic inactivity amongst the over 50s presents serious challenges to the UK economy, as labour shortages exacerbate inflation and threaten economic growth.

For months there has been speculation about a ‘Great Unretirement’ and it would be understandable if investors and businesses were sceptical about the Government’s ability to deliver on this agenda. Back in October 2021, for example, Sunak announced a £500m drive to get older Britons back into work and plug the gap in the labour market. This had little impact, with the rate of over 50s leaving the workforce steadily increasing the first quarter of 2022.

The UK has been an aberration in terms of unretirement. The Learning and Work Institute has undertaken a study which shows that the UK has seen a slower post-Covid return to economic activity among people aged 55-64 than other countries including Germany, the US, Japan and Australia.

But that could be about to change as cost-of-living pressures start to bite . While Government initiatives may have failed to arrest rising economic inactivity in older people, cost of living pressures do appear to be having an impact. According to the Office for National Statistics (ONS), 48,000 people moved out of economic inactivity and into employment between the three months to September and the three months to December 2022. Economic activity among the over-50s is now at its highest level since the pandemic began.

Recognising the desire of many older people to return to work and the important economic contribution they stand to make, the Shadow Work and Pensions Secretary, Jonathan Ashworth, announced that in government Labour would extend free retraining to the over-50s.

Whichever party is in power after 2024, investors should anticipate that getting retirees into employment will be seen as crucial to driving economic growth.

Mel Stride, the Secretary of State for Work and Pensions, has been tasked by the Prime Minister to carry out a review to understand how to attract the economically inactive back into work.

Stride is likely to come under pressure to propose changes to the pension system that would encourage workers to stay in their jobs longer, such as an increase in the tax-free lifetime allowance, which currently stands at £1,073,100.

A current scheme of “Midlife MOTs” – where middle-aged workers take stock of their career with trained advisers – is also set to be expanded. The individual reviews assess finances and opportunities for various types of work retirees could take up.

Regardless of the formal policy response, getting retirees back into work is likely to remain a key government objective even if the number of economically inactive continues to fall in the short-term. The UK has an ageing population and annual welfare costs are expected to increase by £8.2 billion in the next five years. This creates a structural problem as these costs are paid for by the working population via tax.

Investors should anticipate that businesses that have a positive track record of retaining and attracting older workers are likely to benefit, particularly as other employers struggle to compete for talent in a tight labour market.

According to an ONS survey of older people who had left work during the pandemic and not returned, 58% said they would consider returning to work, but many of them wanted more flexible hours, higher  pay or the ability to work from home.

Businesses that can give older workers an attractive route back to work will be better insulated from demographic trends.

It is already widely acknowledged that investing in an ageing workforce has substantial value. The airline easyJet has launched a recruitment drive urging people over the age of 45 to join its cabin crews.

This comes after Fuller’s pubs launched its first recruitment campaign specifically targeting older workers. The pub and hotel group has teamed up with Rest Less, a digital community for individuals aged over 50, to try and attract more people back into the workforce.

Within the civil service there have been drives to attract older workers, with the Department for Work and Pensions announcing last week it would pursue “age positive” recruitment policies by signing up to a national initiative intended to foster age inclusive working practices.

The UK has an ageing population, which will need extra money to be spent on health and welfare but which is less likely to be working and contributing to the economy. The fundamental demographic realities cannot be avoided, but what politicians will want to do is make sure that labour market trends do not exacerbate structural demographic challenges. In 2023 and beyond, investors can expect a clear message from government that the over 50s are as crucial to our economic recovery as younger workers.

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Dairy farming: private equity’s next cash cow?

You only need start an episode of Clarkson’s Farm and you’ll soon pick up some of the immense challenges facing farmers across rural Britain today – longstanding issues with 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. Nevertheless, there are significant and exciting opportunities for growth which make UK agriculture an attractive prospect for investors.

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 5th in the global ranking of deals by country, just behind Germany, India, China and the USA, though the UK government’s ambition is to be a world leader in this space. While investment in upstream technologies like on-farm tech, tools and services remains high at around $20m, there is a shift beginning to take place with interest now moving towards farm management software, indoor farming, ag-biotech (such as gene editing), and e-grocery. Going forward, agri-tech innovations will be crucial in helping the sector manage labour shortages, energy prices and food security. Private equity investment will be crucial in helping the sector get there.

Those close to the industry, both on the farms and holding the purse strings, are particularly excited about the dairy industry. While this farming discipline is not without challenges of its own (fluctuating prices, rising costs, environmental footprint and bovine TB to name but a few), the opportunities for growth are vast. Advances in genomics and precision livestock farming have underpinned recent productivity and efficiency gains across the dairy sector, supporting the transition towards net zero. For example, the application of precision livestock farming using animal behaviour monitoring via diagnostics and sensors have helped provide valuable data insights into the economic and welfare challenges affecting dairy farmers such as lameness, mastitis, fertility and wellbeing. Precision livestock farming systems are being trialed across farms in the UK, US and China and access to rapidly expanding markets in Asia is being supported by the UK government.

The demand for British dairy products remains high, and not just in the UK. The UK exports almost £2 billion of dairy products to more than 135 countries across Europe, North America, Asia and the Middle East. As a result, the UK dairy sector is well placed to capitalise on the government’s ‘Made in the UK, Sold to the World’ campaign as UK farmers are some of the most environmentally progressive and efficient in the world. One study assessed the dairy consumption of 90 dairy-importing countries with a population of nearly 5 billion. It found that between 2011 and 2019, dairy consumption in those countries increased from 258 billion kg to 304 billion kg – an increase broadly equivalent to two years’ worth of the total milk production volume of New Zealand. Countries such as these are expected to see an increase in demand over the next decade, currently projected at 5.6% per year from 2019 to 2025. It is unlikely that they will be able to meet these demands locally.

Alongside this, recent reports also suggest that the EU dairy industry is in decline. Production is expected to fall by as much as 6.3% in Europe over the next 6 years largely because of the implementation of the EU’s Green Deal and resulting updates to the Common Agricultural Policy. This represents a significant opportunity for UK dairy farmers, with dairy export markets typically more profitable than domestic ones. As a result, many dairy processors are undertaking investment to allow them to access growth markets overseas.

In 2022 the National Farmers’ Union expended considerable effort pushing forward a dairy export strategy with the ambition of doubling UK dairy exports in the next 10 years. Working closely with the Department for Business and Trade, the NFU continues to see this as a priority for 2023. Over the coming year we can expect the sector to push for trade and regulatory policy that supports the industry to compete at a global level. It will also court investors to inject vital funds into dairy businesses to maximise the industry’s innovation and resilience; the investors who do, look set for a good yield.

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Private Equity in South Korea – Ready for fame?

South Korea is famous for many things – Samsung, K-Pop, Ban Ki-Moon – but not, perhaps, for private equity.

It should be.

Because in the last twenty years, private equity in the peninsula has undergone a radical and lucrative transformation. At the turn of the century when most of the world was focused on the Millennium Bug, the Bush-Gore Presidential race and The Matrix, South Korea was recovering from a severe economic slump. The Asian Financial Crisis of 1997 had affected South Korea badly. GDP growth fell from 7.9% in 1996 to -5.1% in 1998. Interest rates rose from 6.7% to 10.3% over the same period and the South Korean government was forced to go to the IMF for help.

At this sorry point in South Korea’s economic history, overseas investors saw opportunities. Between 1998 and 2003, a succession of Korean financial institutions – Good Morning Securities, Korea First Bank, KorAm and Korea Exchange Bank – were snapped up by foreign investors seeking to benefit from the economic downturn. Foreign private equity firms are estimated to have invested over $6.6 billion in South Korea during this time and investors reaped the rewards with profits worth billions.

But not all Koreans took kindly to foreign buyouts of household Korean companies. Large-scale protests accompanied the takeover of Korea Exchange Bank and key figures associated with the deal were later imprisoned.

Today, private equity investment in South Korea tells a very different story. The country has embraced private equity on its own terms. Lessons from the Millennium takeovers and the Asian Financial Crisis convinced Korean lawmakers that changes to domestic financial regulations could counter foreign takeovers and support domestic economic recovery. Fundamental changes through the Capital Markets Law of 2005 enabled Korean investment funds to raise capital for investment other than for specific projects – a restriction which had previously curtailed private equity activity.

The benefits for private equity of regulatory change were swift. The number of Korean private equity funds increased from 15 in 2005 to 189 in 2011, with 70 out of the 85 investments in the Korean takeover market in 2011 led by domestic funds. Total private equity investment in South Korea also increased, starting at $3 billion in 2005 before rising to $17.6 billion in 2015 and almost $30 billion in 2021. Analysis by McKinsey in 2018 showed that annualised private equity returns stood at around 20% with an average holding period of just over 3 years. Not bad for an industry that didn’t exist twenty years ago.

But for UK investors there are further reasons to take note. The UK Government has set out its intentions to seek an enhanced trade deal with South Korea. This would build on the existing UK-South Korea Trade Agreement, which largely rolls-over the EU-South Korea Trade Agreement, and introduce new chapters on digital and investment. Outward stock of Foreign Direct Investment (FDI) from the UK in South Korea was £4.6 billion in 2020,  comprising 0.3% of total UK outward FDI. The value of outward UK FDI to South Korea has remained steady over the last decade standing at £4.2 billion in 2011 before peaking at £6.9 billion in 2017 but there is clearly room to grow further. On average in 2020, over 95% of Korean restrictions on Foreign Direct Investment (FDI) were equity restrictions – limiting foreign ownership and foreign investment activity in the peninsula. Although this is not surprising given the reaction to foreign buyouts in South Korea twenty years ago, increasing market access for overseas investors is likely to be an important element of a new investment chapter for UK negotiators in an enhanced UK-South Korea FTA. FDI stock from South Korea in the UK by contrast has grown markedly in recent years from £900 million in 2011 to £3 billion in 2020 – around 0.2% of global inward UK FDI.

The prospects for the South Korean economy to the end of the decade look promising too. IMF predictions show steady growth in GDP of between 2% and 2.7% over the next five years to 2027, with inflation falling to 2% in 2025 – down from 5% in December – and remaining at that level until 2027. The Secretary of State for Business and Trade, Kemi Badenoch, has said that a trade deal with South Korea would allow the UK to “expand our key exports in digital, business and financial services”. If the government in Seoul can be persuaded to open itself further to foreign investors, UK private equity firms will benefit from new and innovative partnerships, providing steady returns for investors.

And the strength of South Korea’s relations with UK investors will be one more thing the peninsula is famous for.

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A trillion dollar lift off in the commercial race for space

As recession looms over the UK economy, investors will be asking: what sectors will be resilient against the headwinds of economic downturn? Conventional wisdom points to those companies, industries, products, or services that we cannot live without, such as healthcare, consumer staples and utilities. But perhaps surprisingly, the space industry is also tipped to be largely recession proof.

Whilst the media grabbing headlines of space tourism or a failed rocket launch often portray an industry characterised by mystique and adventure, the less glamorous technologies that make modern space exploration and exploitation possible will prove fundamental to modern living, and indeed statecraft. From providing location data to mapping weather patterns, natural disaster prevention to protecting national security, everyday life and traditional industries are likely to be the primary beneficiaries of space enabled transformational change.

State-driven endeavours into outer space were a key battle ground of the Cold War. The commercial battle, dubbed ‘New Space’, has become a new field of competition for nations and private companies alike, with the battle for supremacy having rumbled along for well over a decade. Governments around the world are racing to secure their foothold in this evolving domain, recognising the sector’s economic and strategic potential. Or to quote from Policy Exchange’s Space Unit, the first of its kind at any UK think tank, “UK commercial space is not just another commercial market that should be left to the vagaries of a global market, but is a strategic sector of national security interest and importance that provides critically needed technologies and services”.

Slice of the economic pie

At present, the UK space industry generates £16.5 billion annually, more than a trebling since 2000, and space technologies now underpin £360 billion per year of UK economic activity. Globally, the space market is expected to increase from $339billion (2016) to $2.7 trillion by 2045, a figure comparable to the economic might of the oil industry today, which represents nearly 4% of the global economy. The UK economy is well placed to benefit from this future trillion-dollar industry with a 5.1% foothold already established in the global market. However, if the UK wants a large slice of this lucrative pie, it will need to take a leading role in shaping the development of the global space industry, continue to expand and build new spaceports, as well as attract companies to locate in the UK.

Opportunities for investors

Investors have witnessed an inflection point within the space market. Venture capital continues to back start-ups at record levels year on year, creating a generation of companies with proven space technologies. Now is the time for more traditional investors to identify clear revenue raising growth opportunities and scalable space technologies. The investment risk is less about the viability of new space technologies and more about the execution of scaling up and expanding. For institutional investors, it is now a question of capital allocation and portfolio exposure, or rather how big their appetite is to back the space industry when up against other sectors of the UK economy. Reflecting this inflection point, the private equity fund, NewSpace Capital, the first of its kind focusing on the growth stage of space enterprise, recently closed a funding round raising €100m.

Unresolved political risks

The UK has played a formative role in continental Europe’s space architecture as a founding member of the European Space Agency, the principal intergovernmental organisation that cultivates policies, develops programmes and administers funding for the space industry. Crucially, whilst independent from the European Union, it is inextricably linked in administrating the EU’s space and funding programmes. Despite the Brexit withdrawal agreement reached in January 2020, the EU continues to leverage UK participation and access to Horizon Europe, the €95.5 billion funding programme for research and innovation for 2021-2027, and Copernicus, the EU’s Earth Observation Programme, against the outstanding political issue of the Northern Ireland Protocol.

As stated by EU Commissioner Mariya Gabriel in October 2022, UK participation and access is ‘linked’ to (potentially conditional on) resolving the issue of the Northern Ireland Protocol. This political obstacle may be resolved by Rishi Sunak in 2023 as he adopts a more conciliatory approach when compared to his predecessors. For however long the uncertainty remains over the UK’s participation in Horizon Europe and Copernicus, it is damaging for both the UK and EU. Just as waiting in limbo risks the UK falling behind, there also exists a gaping hole in the EU’s planned investments without the UK’s contribution. This is particularly true given the US and China sizeably outspend the UK and EU as a percent of GDP. In the short-term, there are three possible outcomes:

Space falls within the remit of George Freeman, Minister for Science, Research and Innovation, and a former biomedical venture capitalist. In response to industry concerns about waiting in limbo, Freeman recently made available £200 million of the UK’s original £750 million commitment to Copernicus, demonstrating the Government’s willingness to be proactive in remedying some of the immediate bottleneck issues. In total, the Government committed £615 million to the European Space Agency, £217 million to global exploration programmes, £206 million to telecommunication, £111 million to space safety and security, and finally, £71 million to new technologies in November 2023. In addition, funding settlement increased in length from one to three years, a strategic decision for an industry that typically works toward longer timescales.

The House of Commons Science and Technology Committee has a less optimistic take on the UK’s position and approach to space. A recent inquiry found the Government wanting on several fronts and was critical of the Government’s sizeable stake in rescuing the once bankrupt company OneWeb, as well as its decision against developing a new sovereign sat-nav constellation. The Committee called for additional funding – perhaps to compete with that of China and the US – as well as for the Government to publish what a ‘Plan B’ might look like in the event that the UK is no longer granted participation and access to the EU’s space programmes.

Whilst the Government’s November funding announcement brings added certainty for the space industry, further increases in funding is highly unlikely given the cost-of-living crisis and pressure on the public finances. The mood music, however, is changing around the Northern Ireland Protocol with hopes of an imminent resolution, thereby enabling the combined heft of the UK and EU to collaborate on space. Nonetheless, the appetite for space technology will likely weather the UK’s economic recession and with a maturing space market, private investment will be mission critical to ensuring an economic lift off for the next trillion dollar industry.

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UK and Japan – The Quiet Relationship

An island nation, obsessed by tea, known for the politeness of its people and with a hereditary sovereign as head of state. Add the sight of cars driving on the left, school children in uniforms and pubs in every town and there is only country in the world that you could possibly be thinking of.

You would think.

In fact, there are two countries you could be thinking of. The UK or Japan. The island monarchies share similar drinking habits and traffic quirks as well as a long history and a significant economic relationship.

Not that you would know it from reading the news. Missives from political correspondents in Washington D.C. and spats between the UK and France provide much more saleable copy. But that is no reason to ignore the fruitful relationship between East and West. Ever since Margaret Thatcher’s visit to Japan in 1982, the UK and Japan have enjoyed a quiet, steady-as-she-goes relationship that is both strong and stable (to coin a phrase).

If the relationship lacks the drama of the UK’s bonds with its European or North American friends, it shouldn’t be overlooked as a place for low-risk growth opportunities and expansion.

Let’s look at the numbers.

The total value of trade between the UK and Japan to the end of June 2022 stood at £24.6 billion, an increase of nearly 22% since 2012. Total trade before the Covid-19 pandemic was admittedly higher than it is today, reaching £28.8 billion in 2019, but this is par for the course. Total trade grew by 0.6% between 2021 and 2022. The green shoots of recovery are there.

Foreign Direct Investment tells an even better story. Between the vote to leave the EU in 2016 and the Covid-19 pandemic in 2020, investment into the UK from Japan more than doubled from £45.5 billion to £102.3 billion. Over the decade since 2011, inward investment to the UK from Japan has grown nearly fourfold. The decrease in the value of sterling against the yen has, of course, been a major contributory factor. The fall in the pound from just over ¥195 in August 2015 to a low of ¥125 in March 2020 has made investment in the UK significantly more attractive.

But there are other reasons to be optimistic about the opportunities the relationship creates. The UK-Japan Comprehensive Economic Partnership Agreement, signed in October 2020, was the first trade agreement the UK signed outside of the EU with any country. It provided an important political signal of intent between London and Tokyo: that practical economic considerations would win out over any political posturing following the UK’s exit from the EU.

Japan’s enthusiasm for the UK’s application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) is a further sign of the value that Tokyo places on London’s contribution to international trade and politics in the East. Japan’s Economy Minister, Yasutoshi Nishimura, said that “the importance of Britain as a strategic partner and the expansion of the high-level rules beyond the Asia-Pacific are extremely important.”

Since 2018, British troops have also participated in training exercises in Japan with the Japanese Ground Self-Defence Forces through the VIGILANT ISLES series. In May 2022, then Prime Minister Boris Johnson and Prime Minister Fumio Kishida agreed a Reciprocal Access Agreement to facilitate UK and Japanese Armed Forces on training, joint exercises and disaster relief activities – the first such agreement for a European country with Japan. Johnson also announced the appointment of a new trade envoy to Japan, former Business Secretary, Greg Clark MP, to drive investment between the two countries.

Emperor Naruhito and Empress Masako’s attendance at The Queen’s funeral in September was the couple’s first overseas trip since the emperor’s accession in 2019. A further diplomatic coup and a show of the enduring relationship between the royal families.

Relations between the two countries are arguably stronger now on the economic, military and diplomatic front than at any time since the Meiji restoration in 1868. The ever-closer relationship between London and Tokyo puts the stability of Japanese investment in the UK in good stead over the medium to long term. For investors, the opportunities that stem from this relationship should not be ignored – even if they don’t make the headlines.

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UK and China – Happily Never After?

The UK and China were once good friends. Or so we were led to believe. Speaking at the Shanghai Stock Exchange in September 2015, then Chancellor of the Exchequer, George Osborne, spoke about creating a ‘golden age’ in Sino-British relations.

A month later, President Ji Xinping paid a state visit to Britain which included a ride down The Mall with The Queen and a lavish banquet in his honour at Buckingham Palace. Ensconced between The Queen and the Duchess of Cambridge at the banquet, President Xi could justifiably feel that his country had found its bestie in the West.

In 2018, the Chinese Ambassador to London talked about turbocharging relations even further. He wanted to put the golden age into “higher gear”, he claimed, and build “an even brighter future for the people of our two countries”.

It all seemed so rosy and the future for investors looked so promising.

But fast forward to 2022 and the geo-political landscape is unrecognisable. The Golden Age has turned into an Ice Age – a period of recriminations, grievances and conversations labelled ‘frank’ in diplomatic circles. Investors would be right to be wary.

Demonstrations in Hong Kong, concerns over Huawei’s proposed investment in strategic infrastructure, human rights abuses in Xinjiang, the Covid-19 pandemic, and scenes of the Chinese police beating a BBC journalist are hardly propitious foundations for friendship. President Xi, who has secured an unprecedented third term as leader, has also doubled down on an assertive foreign policy. He rails against so-called Western ‘bullying’ and is pushing a repressive domestic agenda intent on eradicating Covid-19. The two governments now view each other with grave mistrust, with Prime Minister Rishi Sunak stating that the “golden era is over, along with the naïve idea that trade would automatically lead to social and political reform.”

The politics, in short, bode badly for the future. The economics, however, tell a different tale.

Trade volumes between the UK and China have increased by 27% over the last four years. Total trade in 2018 stood at £73.2 billion, rising to £86.8 billion in 2019 before falling during the pandemic and rising again to £93.1 billion in 2021.

Maybe that’s because the UK and China can’t afford to let political fights upset their economic relationship. The downturn in the UK economy is well documented. GDP growth fell 0.3% between July and August and the UK economy is smaller now than at the start of the year. Former Prime Minister Liz Truss’ efforts to turn the tide were met with widespread disruption in the financial markets, with the Bank of England stepping in to support the bond markets, and mortgage interest rates rising to their highest level in 14 years. It’s also a difficult time for private markets: the UK economy is officially in recession.

If things are bad in the UK, prospects in China are not much better.

The Chinese economy used to be the thing of myth, with growth that made Western leaders salivate at the prospect of getting a slice of the pie. Annual growth in the Middle Kingdom saw a clear upward trajectory in the late 1990s and early 2000s, reaching a peak of 14.2% in 2007. But ever since, the Chinese economy has been distinctly less appealing. China has recorded a steady decline in annual GDP growth since 2007, falling to 6% in 2019 and temporarily plunging to 2.2% in 2020 – the pandemic year. While growth of 6% in 2019 (and over 8% in 2021) may still sound tempting to some Western leaders, there is more trouble looming.

This year, the yuan fell to its lowest rate since 2008 and the national youth jobless rate hit almost 20% in July. Even official statistics shows that China’s manufacturing PMI has only been above 50% for four months of 2022 – any figure below 50% shows a reduction in activity – with manufacturing PMI in October standing at 49.2%. JP Morgan also forecasts year-on-year GDP growth in the final quarter of the year to stand at 2.7%, down from a previous forecast of 3.4%.

The property market in China is in turmoil too. Year-on-year, property sales fell by over 23% in October and property investment has declined by 16%. In August, house prices fell by 1.3% – their fastest decline in seven years. Chinese policymakers have attempted to sweeten the market by cutting the five-year loan prime rate that underpins mortgage lending to 4.3% and relaxing the floor on mortgage rates for some first-time buyers. But the bitter taste of an undercooked pie still lingers. The property crisis took a trillion dollars off the value of the sector last year.

But investors should steady their nerve. As their economies stutter at home, the UK and China need to keep in with their economic partners overseas. The Prime Minister may continue to view China as a “systemic challenge to our values and interests” but he also claims that we “cannot simply ignore China’s significance in world affairs”. Significant material restrictions in trade have yet to materialise, despite tensions between London and Beijing. Economic reality, it seems, trumps political posturing. UK firms exposed to Chinese investment will be able to rely on firm support from their Asian trading partner for the foreseeable future and trade between the UK and China will continue to boom. Even if President Xi won’t be enjoying another carriage ride down The Mall anytime soon.

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WA supports Agathos on the successful acquisition of Targeted Provision

WA Investor Services is delighted to have advised Agathos on its successful acquisition of Targeted Provision, the market leader for provision of bespoke SEND (Special Educational Needs and Disabilities) tuition, mentoring and educational support packages for children and young people with SEND.

Agathos’ investment will help support Targeted Provision expand the business’s customer base, build its pool of exceptional tutors and continue to provide high quality support to an underserved part of the SEND market.

WA Investor Services provided political and regulatory due diligence in support of the investment, drawing on our extensive network of policymakers to provide a detailed assessment of the likely effects of the Government’s SEND reform agenda on private SEND tutoring providers. WA’s insights gave significant reassurance to Agathos and were integral to the deal process.

Tom Street, Agathos said:

“WA’s insights into the relevant political drivers have been highly valuable in supporting our investment in Targeted Provision. WA’s deep sector expertise and expert judgements helped us comprehend what is a complex policy, funding and regulatory landscape. They were able to provide analysis, information and intelligence that supported our understanding of Targeted Provision’s ability to deliver a compelling and impactful solution in what is an underserved and well-regulated part of the market. We always highly value WA’s input and look forward to future opportunities to work with them again.”

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said:

“We are extremely pleased to have worked with Agathos on this transaction. With our unrivalled access to key officials directly involved in SEND regulatory reform, WA’s Investor Services practice were really well placed to support the Agathos team in understanding the outlook for Targeted Provision from a regulatory and funding perspective. Demand for SEND provision continues to rise in the UK, and Agathos’ investment will undoubtedly represent an exciting new chapter for the business as it seeks to expand to meet the needs of children with additional needs. We look forward to seeing the business continue to build on an incredibly strong foundation in the coming years.”

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The UK and France – A Family Affair

The UK and France are like siblings. They may love each other deep down but most of the time they seem to be fighting it out. Always trying to outdo the other.

So it has been since 2016 – the year of Brexit – when the UK and France seem to have been at constant loggerheads. Then President François Hollande famously declared after the Brexit vote that “there must be a threat, there must be a risk, there must be a price” to the UK leaving the EU. President Emmanuel Macron continued that hardline stance, constantly criticising the arguments of the Leave campaign, opposing extensions to the UK’s timetable for leaving the EU and holding multiple ‘Choose France’ business summits to secure investment from overseas.

Events reached a nadir when, in this summer’s Conservative Party leadership campaign, Liz Truss was asked whether she considered Macron a friend or foe. Truss hesitated, smiled and looked out to the audience. ‘The jury’s out,’ she declared to cheers from the room.

Macron was asked about Truss’ remarks that same day. He paused, let out a long sigh and stifled a smile. “I don’t question it for a second: the UK is a friend of France,” he said. His face afterwards erupted into a broad grin – recognition that this was but the latest development in a very long-running family saga.

With Prime Minister Rishi Sunak at the helm, the relationship has taken a turn. At their first bilateral meeting at the COP27 summit in Egypt, Sunak and Macron were the vision of brothers reunited. All smiles, handshakes and ritual back slapping. After the event, Sunak tweeted that the UK and France were “friends, partners and allies” – a pointed rejoinder to Truss’ characterisation of the relationship.

So what do the ups and downs of British and French relations mean for business? Should investors take note?

The evidence of the last few years points to a mixed and often counterintuitive picture. The political drama of the Brexit years, for instance, had little effect on trade volumes. In 2015, total trade between the UK and France stood at £65.1 billion. It rose after the Brexit vote to £78 billion in 2017, £82.9 billion in 2018 and £84.4 billion in 2019 but fell again to £67.1 billion in 2020 – the pandemic year.

The same variation exists for Foreign Direct Investment (FDI). UK outward FDI stood at £60.5 billion in 2015, rising consistently every year to reach £85.5 billion in 2020. UK inward FDI stock stood at £69.6 billion in 2015, before rising and falling in successive years to end at £69.1 billion in 2020. The French stock market, however, has overtaken the UK’s as Europe’s most valuable. The CAC-40 has grown by 47% since 2020 while the FTSE 100 has only grown by 16%.

Steady trade volumes between 2016 and 2020 suggest that trade opportunities created by the relative weakness of the pound outweighed any loss of confidence that resulted from political hostility between the UK and France. The rally of exchanges between British and French politicians during the Brexit years were simply par for the course for business – a continuation of the long and complex rivalry between two countries stretching back a thousand years.

The variation in inward FDI since Brexit may be more nuanced, linked to broader investor uncertainty about the UK’s future outside of the EU. The disparity in the value of the French and UK stock market is more structural, linked to the nature of the businesses listed on the CAC-40 and the FTSE100 as well as recent political upheavals in the UK.

The immediate economic future for both countries is difficult but in different ways. Inflation in the UK hit 11.1% in October while inflation in France reached 6.2%. Unemployment in the UK stands at 3.6%, rising to 9.8% among those aged 16 to 24, while unemployment in France stands at 7.3% rising to 18.3% among those aged 15 to 24. Political difficulties are also plaguing the French President, with his party working with a minority government in L’Assemblée Nationale and the IMF stating that the French government should stop its “whatever it takes” attitude to support households and businesses through the energy crisis.

For investors, the key to understanding the effect of British-French political developments on investments means assessing the likelihood that the intense rivalry between the two countries and the relationship between its political leaders translates into policy changes that affect the ease of doing business in either jurisdiction.

In the meantime, the UK and France may soon be fighting it out again, with a quarter-final match between England and France in the football World Cup not beyond the realms of possibility. They could yet have another opportunity to showcase their rivalry to the world.

If you would like to discuss the UK-France relationship in more detail please contact our policy specialist Thomas Sharpe on

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Critical investment for critical minerals

The proverb goes ‘when everyone is digging for gold, it’s good to be in the pick and shovel business.’ If the energy transition of the 21st Century bears any semblance to the 19th Century gold rush that spurred the Industrial Revolution, what then are today’s picks and shovels that investors can capitalise on? The answer… critical minerals, such as lithium used in batteries or graphite used in aerospace applications and nuclear power plants.

Why? Because reaching the goals of the Paris Agreement will require a fourfold increase of current minerals inputs for clean technologies by 2040 and hitting the global Net Zero target by 2050 will require a sixfold increase of mineral inputs by 2040. Or rather, an increase from 7 million tonnes to 27.3 million tonnes for the Paris Agreement and 42.9 million tonnes for Net Zero targets. Perhaps more alarmingly, stated policy measures drastically fall short of future demand and a lack of critical minerals risks the great energy transition that will define this century all together.

The current UK state of play is intensely risky due to global trade concentration and near exclusive reliance on imports. Of the 26 critical minerals measured against global supply risk and UK economic vulnerability, only titanium scores a ‘low criticality’, 6 score ‘elevated criticality’, and the remaining 19 critical minerals score ‘high criticality’. As key ingredients in a clean and green future, the UK is heavily exposed to a market where the top three producer countries (China, South Africa and Brazil) control between 73% and 98% of total global production of at least 18 of these critical minerals – perhaps more exposed compared to the supply chains disrupted by the Covid-19 pandemic.

Government thinking about critical minerals began in 2010 when a trade dispute between China and Japan led to raw earth mineral prices quadrupling. Although China was able to demonstrate its market dominance, it wasn’t until 2021 when UK policymakers turned their thinking into concrete policy ambitions; somewhat late to the game compared to the US which began providing direct investment in production facilities in 2018.

The Integrated Review of Security, Defence, Development and Foreign Policy (currently being revised after failing to anticipate Russia’s invasion of Ukraine) was published in 2021 and quickly followed by the Critical Minerals Strategy in 2022. A Critical Minerals Expert Committee and Intelligence Centre were created in 2022 for advisory and knowledge sharing purposes, as well as a set piece funding announcement for the world’s first refinery hub, a midstream process for refining raw earth materials, powered entirely by offshore wind.

This step change by government in setting out its high-level intentions and policy ambitions is welcomed by investors. One investor told WA that “the government strategy is required because all the capacity is currently in China who are well established… and for the UK and Europe to suddenly compete you have pile in a lot of investment.” Or in the words of another industry expert, the challenge now is “…figuring out if this signpost will actually lead to pots of gold.”

A repeated concern of the Critical Minerals Strategy is an absence of deliverables and detail. It only goes part way in providing the necessary ‘enabling environment’ to attract greater private sector investment. The government already offers a range of funding pots from which the critical mineral sector can draw, such as the Automotive Transformation Fund (up to £850m) or the UK Infrastructure Bank (up to £22bn). However, if the government is truly serious about the UK’s vulnerability in the critical minerals game it will need to significantly step-up funding, its mechanism of distribution, and reform some of structural market barriers, such as the permitting and planning process for domestic extraction. Doing so will unlock private sector activity, capital and finance across the sector from exploration, extraction to refinery both at home and from abroad. It will also crucially, de-risk investment as government policy and funding aligns ever closer with new investment opportunities.

Resolving the critical minerals conundrum will require the same approach adopted for the British success story of ‘going for wind’ in the energy market. Government support since the early 2000s in cultivating, developing, and expanding wind turbines installed offshore has established the UK as the global leader in offshore energy. Central to the government’s approach was a clear partnership with private sector finance, working together in transforming a now maturing market where electricity generated from wind power increased by 715% from 2009 to 2020, generating almost £6bn in turnover in 2019. Government support matched its rhetoric, in turn boosting investor confidence and investment opportunities in offshore wind. As for critical minerals, the sector is, comparatively speaking, at the cultivation stage and whilst government rhetoric provides much needed clarity, funding will need to speak louder than words.

We can expect to hear more from both main parties ahead of the next general election. Investors should ready themselves for a government delivery plan in the coming months which will provide further detail and timeframes, as well as a national-scale assessment of critical minerals collating geoscientific data by March 2023 – crucial for spotting domestic investment opportunities. Beyond the next general election, critical minerals will be a priority for government whichever political party wins. Just as supply chain resilience is a particular concern for the current Conservative government, critical minerals will also be an indispensable ingredient of Labour’s flagship ‘Green New Deal’.

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The UK and India Trade Agreement: Bottom’s up!

Having conceded that a trade deal with the US is unlikely to materialise while Biden remains in the White House, the government has shifted its focus to striking deals with other big economies at speed before the next election. As Trade Minister in the Truss government, Kemi Badenoch, had reportedly been told that her priority was to secure a free trade agreement with India in time for Diwali (24 October), the deadline set by India’s Modi and Truss’ predecessor, Boris Johnson. The deadline has passed without any deal being finalised.

Investors are, however, particularly optimistic about what a trade deal with India could mean for the Scotch whisky industry, which has dominated the negotiations so far. No other nation drinks as much whisky as India but thanks to tariffs of 150% on imported liquor, Scotch whisky currently accounts for just 2% of the market. The impending deal ought to be music to the ears of Scotland’s world-famous industry and is looking especially rosy for beverage company Diageo plc, which owns over 200 drinks brands with sales in over 180 countries, including the world’s bestselling Scotch whisky brand Johnnie Walker. If the rumours are true that the UK is on the cusp of securing a cut to India’s steep tariff on imports, Citigroup has predicted that Scotch sales could rise by as much as US$ 2.9 billion.

But there’s a catch.

India may well be prepared to slash the federal whisky tariff, but Delhi’s negotiators are using it as leverage to get what they want out of the deal. In the latest plot twist, India threatened to apply $247 million of retaliatory tariffs on Scotch and other industries if Britain refuses to abandon controversial safeguards, it put in place to protect its domestic steel industry. This approach is not dissimilar to the one India took with the US – also over steel.

Publicly, the UK’s trade department says it will “only sign when we have a deal that meets the UK’s interests.” Though, privately, insiders are reportedly acknowledging India’s “dirty tactics” to push the UK into a deal that is expected to focus on eliminating goods tariffs.

Meanwhile, the UK’s services sector is having doubts that the trade deal will benefit British firms at all. In August, several business associations, including representatives from the financial services, pharmaceutical, tech and chemical industries, voiced their concerns about the speed of the talks and what could meaningfully be agreed in the time. Though we do make a lot of whisky, the UK remains overwhelmingly a service-based economy and securing strong protections for intellectual property rights and the free flow of data between the two counties were key objectives for the deal set out in the UK’s strategic approach for talks. Yet data looks to be a major roadblock to landing a deal that secures big wins for the UK’s services giants. David Henig, director of UK trade policy at the European Centre for International Political Economy, has concluded that the deal is set to be “predominantly a fairly narrow set of tariff reductions rather than anything significant that will change the cost of doing business in India for UK companies.”

The services sector has made a direct plea to the Indian government via the UK India Business Council to unravel the bureaucratic red tape that is regularly prohibitive for investors looking to set up or expand operations in India. The Council has urged India to take a broader view of priority sector lending norms for foreign banks operating in India and sought equitable tax treatment, while also flagging the increase in counterfeit product sales through e-commerce platforms as a deterrent for intellectual property owners. Even with tariff cuts on Scotch, the whisky industry has warned that a host of bureaucratic barriers will prevent the reduction from being worthwhile. Whether the Indian government takes heed, either as part of or alongside the trade agreement, is currently unclear.

The negotiations are also the source of some tension within the government. The Indian government is pushing for a significant liberalisation of visa routes for workers and students as part of the trade deal. Although some senior cabinet members may be supportive of relaxing immigration rules to help businesses fill vacancies, Badenoch (alongside Home Secretary Suella Braverman) are previously understood to have opposed proposals for a ‘freedom of movement’ agreement. How this plays out over the next few weeks is uncertain but the latest iteration of Conservative government is likely to be tentative about pushing through anything too unpopular with voters.

The Queen’s death has also added an unexpected dimension to the trade negotiations, with the debate about the Koh-i-noor diamond reignited. Shortly after her death was announced, ‘Kohinoor’ started trending on Twitter in India. The diamond, one of 2,800 stones set in the crown made for the Queen Mother which Camilla is set to wear at King Charles’ coronation, is the 105-carat oval-shaped brilliant proverbial jewel in the crown. Believed to be mined in modern-day Andhra Pradesh between the 12th and 14th centuries, the earliest record of its possession puts it in the hands of the Mughals in the 16th century. The East India Company acquired the stone in the late 1840s from 10-year-old Maharajah Dunjeep Singh. The company presented it to Queen Victoria and it was placed in the Queen Mother’s crown in 1937. The Koh-i-noor has been among the British crown jewels ever since, but governments in Iran, Afghanistan, Pakistan, and India have all laid claim to the diamond.

In 2016, the diamond was at the centre of a court battle after an NGO filed a petition asking the court to direct the Indian government to secure its return to India. At the time the solicitor-general, representing India’s government, said the diamond was a gift to the East India Company and it was “neither stolen nor forcibly taken.” However, the government later U-turned and said it would make all possible efforts to return the diamond to India amicably.

It is not publicly known if, or to what extent, the diamond has formed part of the trade negotiations. The strength of feeling among the people of India about the cultural significance of the diamond, combined with the UK’s weakening position in negotiations, have led many historians and political commentators to postulate that it might be India’s final trump card to play.

If you would like to discuss the India trade deal in more detail, please contact our policy specialist Thea Southwell Reeves on

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The Celebrity Touch: What does it mean for Private Equity?

The announcement that Kim Kardashian is setting up a private equity firm has injected some celebrity magic into the normally sedate world of alternative investments. Kardashian, best known for her role in the reality TV show ‘Keeping up with the Kardashians’, is branching out into the investment industry with business partner, Jay Sammons, formerly of The Carlyle Group.

Kardashian’s new company, SKKY, is set to focus on sectors which the TV and social media star knows well: consumer products, consumer media and luxury. Traditionalists who say it will never work should look closer. With a reported net worth of over $1 billion, Kardashian is nothing if not a savvy businesswoman.

Skims, a clothing company which Kardashian founded in 2019, was valued at $3.2 billion in January 2022. Kardashian also sold a 20% stake in her cosmetic brand, KKW, to Coty for $200 million last year. Kardashian, who boasts 319 million followers on Instagram, knows how to leverage her celebrity for financial returns.

The experience of her new business partner, Jay Sammons, will of course help. Sammons was previously Head of Global Consumer, Media and Retail at Carlyle. He was also the driving force behind Carlyle’s investments in Beats Electronics, Vogue International and Ithaca Holdings. Sammons, in other words, has previous. Combined with Kardashian’s global influence, an investment from SKKY could well support portfolio companies’ sales and see stronger market valuations.

But it’s not as if Kardashian is the first celebrity to go down this route. Others have already started down the same road. Recently retired tennis superstar, Serena Williams, entered the alternative investment space in 2014. Her business, Serena Ventures, aims to invest in founders ‘whose perspectives and innovations level the playing field for women and people of colour’. Rapper Jay-Z founded Marcy Venture Partners focusing on ‘consumer and culture with an emphasis on positive impact’. Fellow music artist Snoop Dog has started Casa Verde Capital.

What does this celebrity trend mean for sector? Are there any political risks?


Stateside, President Biden already has private equity in his sights. Concerns about oligopolies and private equity buying swathes of American businesses are causing disquiet among policymakers across the pond. Celebrity involvement in private equity will only draw further attention to a sector that political heavyweights already feel is underregulated.

Whilst private equity involvement in a range of sectors in the UK periodically makes headlines, the government is still in a different regulatory place to policy makers across the Atlantic. Then Parliamentary Under-Secretary of State in the Department for Health and Social Care, Lord Kamall, said last year that ‘private equity plays a role in many companies in turning them around and retaining jobs.’ Under the new Truss government, which is expected to be less interventionist from a regulatory perspective than its predecessors, we can expect this trend to continue.

The Government has been clear that there are established processes for considering public interest concerns if necessary under the Enterprise Act 2002 and the National Security and Investment Act 2021. In an economic and energy crisis, there is little appetite in government to focus attention on the private equity sector.

Yet the risk for private equity investors in the UK is perhaps more acute than in the US. Celebrity involvement in UK private equity, should this become more widespread, has the potential to raise the profile of a sector that has largely managed to stay off the government’s radar.

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What does the Truss Premiership mean for private equity investment in football?

Truss’ in-tray is bulging as she enters No.10, and although a World Cup win in Qatar would undoubtedly inject a much-needed boost of morale to the long, bleak winter ahead, football is unlikely to be at the top of her to-do list.

But love it or loathe it, no one can deny the Premier League’s role as a significant source of UK soft power and, increasingly, world football’s dominant financial power. The 2022 summer transfer window is a prime example; Premier League clubs spent around £1.9 billion, pulverizing the previous record of £1.4 billion set in 2017. Put another way, England’s top twenty clubs spent more than all clubs in Spain’s LaLiga, Italy’s Serie A and Germany’s Bundesliga combined. The UK government plays a major role in creating a favourable political and regulatory environment for football’s finances to thrive, and under successive Conservative governments, that’s exactly what’s happened. Truss, as former Trade Secretary, will be acutely aware of the league’s status as one of the UK’s most successful exports.

Nevertheless, football has found itself increasingly in the political and public spotlight in recent years, most notably with the unprecedented wave of backlash to the now aborted plans for six Premier League clubs to break away and form a European Super League. Arguably one of the biggest own goals in recent football history, JP Morgan Chase & Co had allegedly intended to back the project. In 2022, the government found itself under mounting pressure to sanction then Chelsea owner, Roman Abramovich, possibly the most well-known Russian oligarch in the UK. Whilst Abramovich was not initially included on the sanctions list in response to Russia’s invasion of Ukraine, the sale of the club for over £4 billion to a consortium led by American Todd Boehly and private equity firm Clearlake Capital, was not without controversy.

Politicians have also made notable comments about footballers in the press. In the early days of the Covid-19 pandemic, then Health Secretary, Matt Hancock, said “I think the first thing that Premier League footballers can do is make a contribution, take a pay cut, and play their part.” The decision of footballers to take the knee in support of the Black Lives Matter movement and anti-racism in the sport also received mixed political response. Truss herself, then Equalities Minister, criticized the practice, saying it was “not the right thing to do” and a form of “identity politics focused on symbols and gestures.”

This has culminated in a remarkable appetite for change, primarily driven by fans, to address the culture, governance and financial flow in the existing football system. In his overly-enthusiastic opposition to the European Super League (despite hosting the former Executive Vice-Chairman of Manchester United just days earlier and declaring it – according to a government source – “a great idea”), Boris Johnson commissioned Tracey Crouch to chair the Fan-Led Review of Football Governance. The report is not a perfect roadmap (it says very little about women’s football or the sport’s toxic relationship with the gambling industry), but its diagnoses are damning: the underlying disconnect between fans and owners, inadequate regulation, and the cavernous financial inequality between the biggest and smallest clubs. To shake this up, the review proposes the establishment of an independent regulator which would oversee financial regulation in the sport, an increased role for fans in club decision making, and a 10% transfer levy on Premier League clubs to be distributed to the grassroots game.

Although Truss previously indicated that she would back the review’s 47 recommendations, recent rumours suggest that she will now backtrack on this due to waning support amongst influential players in her own team. Johnson recognised the popular appeal of football and was fully prepared to harness it ahead of the next general election. Truss will have bigger challenges and priorities to grapple with and is likely to lack the political appetite to drive forward a complete structural overhaul of the sport.

Football’s growing fanbase

Private equity has gradually been gaining a foothold in the world’s most popular sport and will be a keen spectator to Truss’ next move. Taking a lead from the billionaire soccer fans, Middle East petrodollars, and the spate of Chinese purchases which have dominated football investment over the past two decades, private equity, credit vehicles and hedge funds now represent the latest wave of investors. The industry was once considered too risky due to eye-watering levels of debt, inflated player salaries and the unpredictability of politics and febrile fans. The threat of relegation if teams don’t perform well means that returns are never guaranteed. However, investors are finding creative ways to address this volatility. Some have loaned money to keep Europe’s high-profile clubs afloat. Others have purchased media rights, bought a stable of smaller teams, or snapped up stakes in clubs as assets in peril. In 2019, US private equity firm Silver Lake paid $500 million for a 10% stake in City Football Group, which counts Manchester City, Yokohama F. Marinos in Japan, Girona FC in Spain, and New York City football team in its collection. Some are even pursuing the Holy Grail of investing in an entire league, like UK-based private equity firm CVC Capital Partners’ venture with Spain’s LaLiga.

European football has always been cash hungry, but that has grown more acute since the pandemic kept crowds away from stadiums and left some of the continent’s biggest and most successful clubs with soaring debt. Indeed, it was the catalyst behind the failed breakaway Super League. This had left many Premier League clubs reeling at the suggestions included in the Fan-Led Review, and arguing that proposed changes would reduce the competitiveness of the league and therefore its value to the UK. Private equity investors are concerned that cascading finances down the system will impact their returns. However, in an attempt to address some of the issues highlighted by the review, many clubs are taking remedial action (such as introducing supporter ‘shadow boards’) in an attempt to stave off full frontal regulatory reform. By addressing concerns around governance and financial fluidity downstream in the system, the Premier League could alleviate some of the existing political pressures.

Whether Truss gives the recommendations a red card or not, you can’t help but sense that change is on the horizon for the Premier League. Nevertheless, there will always be a strong demand for English football and fans will continue to buy tickets. These two simple facts mean private equity is unlikely to be relegated from football any time soon.

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What are the chances of a breakthrough on the Northern Ireland Protocol?

In the early hours of 8 December 2017, a bleary-eyed Theresa May shook hands with a sleepy Jean-Claude Juncker on an interim Brexit agreement, supposedly resolving the issues around Northern Ireland. That handshake has plagued the UK’s relationship with the EU ever since.

The interim agreement was supposed to allow progress in the exit negotiations to move to other issues such as trade. For a while it seemed to do so, but recriminations soon began. In June 2018, then Secretary of State for Exiting the EU, David Davis, was actively briefing against the so-called Northern Ireland backstop. He resigned the following month. By December 2018, then First Minister of Northern Ireland, Arlene Foster, said removal of the backstop ‘has been our message from the day a backstop was conceived.’

That was then. What about now? Despite agreeing to an amended Protocol and backstop as part of a revised Withdrawal Agreement in December 2019, the British government argues that the Protocol in practice is not working as it should. Rather than maintaining Northern Ireland’s place in the UK and its internal market, the government believes that it is doing the reverse: threatening the province’s economic settlement within the UK.

With images of food shortages in Northern Ireland and complaints of burdensome customs paperwork, the UK government has evidence to back up its assertions. The EU for its part argued that the Protocol is a consequence of Brexit and the only solution to challenges in Northern Ireland.

But the consequences are more than economic. In May, the republican Sinn Fein party became the largest party in Stormont. For the first time since power-sharing in Northern Ireland began in 1998, there would not be a unionist politician as First Minister.

The second largest party in the May elections was the unionist DUP. But its leader, Sir Jeffrey Donaldson, stated that his party would refuse to nominate a deputy first minister, unless the Northern Ireland Protocol were replaced. The DUP blames the Protocol for endangering Northern Ireland’s economic and constitutional settlement with the UK and since the Executive requires cross-community consent, there can be no government unless the DUP changes its mind.

The deadline for forming an Executive is not infinite. Unless an Executive can be formed by 28 October, further elections will be held. Political instability in a constitutionally fragile province during a cost of living crisis is not an ideal situation.

But there might be light at the end of the tunnel. Vice-President of the European Commission, Maros Sefcovic, has said in recent days that the pressure of the Protocol and the restrictions placed on trade could be reduced. Checks on only a few lorries a day would be required if the UK were to agree to the EU’s new plan.

It sounds almost too good to true.

The EU’s new plan would require the UK to provide the bloc with real-time data on trade movements. According to Sefcovic, checks would only take place ‘when there is reasonable suspicion of…illegal trade smuggling, illegal drugs or dangerous toys or poisoned food’.

Will the UK agree to it? Not publicly at the moment. As well as unilaterally extending grace periods, initially intended to ease the transition for Northern Ireland and Great Britain into the Protocol arrangements, the Government has a further proposal of its own. The new Prime Minister, Liz Truss, introduced the Northern Ireland Protocol Bill in Parliament in June while she was then Foreign Secretary. This Bill would seek to unilaterally disapply those parts of the Protocol that the government believes are hampering the constitutional and trade relationships between Great Britain and Northern Ireland: customs processes, regulations, tax issues and governance.

Speaking in Parliament in her first Prime Minister’s Questions, Liz Truss re-stated her preference for a negotiated settlement but that this had to ‘to deliver all the things that we set out in the Northern Ireland Protocol Bill.’

The EU cannot countenance the UK taking unilateral action to extend grace periods and disapply parts of the Protocol and is taking legal action against the British government. Both the UK and EU have solutions they claim to be practical and logical. But neither, it seems, wants to accept the other’s solution.

Which means that uncertainty – the great enemy of investment – remains a real and present danger in Northern Ireland. The next early morning handshake to try to resolve issues in Northern Ireland is a long way off.

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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

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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 5th 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

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WA Explainer: What is the Northern Ireland Protocol and why is the government trying to change it?

Many people thought (or hoped) that the need to keep up with Brexit stopped in 2019. As the WA Investor Services team and other seasoned Westminster watchers will tell you, Brexit has been bubbling under the surface since the initial deal was signed, with the UK and EU locked in ongoing, and not entirely productive, negotiations ever since.

Now, after months of hinting at the need for more dramatic action to break the negotiating deadlock, the government has published the highly controversial Protocol Bill, which it argues will solve some of the issues that the current Brexit deal has created in Northern Ireland.

The Bill has huge consequences for UK-EU relations, the stability of power sharing in Northern Ireland and Prime Minister Boris Johnson’s own political fortunes. With all that in mind, we’ve put together an explainer of the position of the UK and EU on the Northern Ireland protocol, what the Bill seeks to change, and what it will mean for both sides in the future.

What is the Northern Ireland Protocol?

The Northern Ireland Protocol is the part of the Brexit deal that sets out special customs and regulatory arrangements for Northern Ireland in light of its land border with the Republic of Ireland, an EU country. Both sides agreed that avoiding a ‘hard border’ between the Republic and Northern Ireland was a key priority. The eventual compromise was to create a customs border in the Irish Sea, rather than on the island of Ireland. Goods crossing into Northern Ireland are checked as though they are entering the European Union. Northern Ireland must, in certain areas, follow the jurisdiction of the European Court of Justice (ECJ).

In return, both sides agreed that Northern Ireland businesses would have access to both UK and EU markets without the need for further checks. This arrangement appears to have resulted in economic benefits for Northern Ireland. Data from the Office for National Statistics shows that the only regions in the UK to have seen GDP recover to pre-pandemic levels are Northern Ireland and London, though Northern Ireland recorded the largest drop in GVA of any region in Q1 2022.

The current terms of the Protocol are strongly opposed by Unionist parties in Northern Ireland, who argue that the presence of a customs border between Northern Ireland and the rest of the UK undermines the union. The Democratic Unionist Party (DUP) is now refusing to form a new power-sharing government in Northern Ireland until a solution to its concerns is found. Despite this, the Protocol is not universally opposed in Northern Ireland. On 13 June, 52 out of 90 members of the Northern Ireland Assembly wrote to Boris Johnson to “reject in the strongest possible terms your government’s reckless new protocol legislation”. The letter is an indication that the government’s proposals do not guarantee an end to Brexit-related tensions in Northern Ireland.

What is the government trying to change?

The government is arguing that the current agreement undermines the Belfast/Good Friday Agreement in Northern Ireland and creates additional, unnecessary bureaucracy for businesses trading between Northern Ireland and the rest of the UK. Protecting the Agreement is key to the government’s reasoning for introducing the Bill. In a summary of its legal position on the protocol, the government said it is relying on the “doctrine of necessity,” which it argues would “lawfully justify non-performance of international obligations” because of Northern Ireland’s “genuinely exceptional situation.”

The Bill proposes to override some parts of the protocol unilaterally. Under its proposals:

Can the government secure the changes it wants?

Johnson has been criticised by opposition parties and some Conservative MPs for seeking to override a deal he only agreed to in 2019. The UK government has argued that the deal has had “unforeseen consequences”, particularly for the stability of the Good Friday Agreement. Some MPs are also concerned about the legality of the Bill. Others are concerned that the UK’s actions will undermine its international standing, particularly as it still seeks to negotiate trade deals with major developed and emerging economies.

As a result of these concerns, the Bill will face a challenging journey through Parliament before it can become law. This process is likely to take months. It is extremely likely that members of the House of Lords and MPs will seek at least to amend the Bill to water down some of the proposals.

The key political test for Johnson, however, will be whether he faces a significant rebellion from his own backbenchers. The European Research Group (ERG) of pro-Brexit MPs have also yet to give the Bill their backing and plan to scrutinise the Bill line by line before announcing how they will vote. It is likely that at least some of the One Nation group of Conservatives will vote against the Bill over concerns that it breaks international law, but they will not have enough votes to defeat the Bill alone. If a broader coalition within the party chooses to rebel on the issue, and Labour chooses to vote against the Bill, there is a risk it could be defeated. However, the size of Johnson’s majority and the lack of organised opposition to Johnson or the Bill itself within the Conservative Party make a rebellion of the necessary size difficult to achieve.

What is the likely response of the EU?

The EU is strongly opposed to the UK’s current action and has stated that there will be serious consequences if the UK moves to change the Protocol unilaterally. In the short term, expect the EU to put forward revised proposals of its own to try to continue dialogue between the two sides. Continuing negotiations are supported by the UK and EU, and therefore we are likely to see ongoing talks take place even while the UK government seeks to pass the Protocol Bill.

The European Commission is also expected to relaunch legal action against the UK, which was previously paused to allow for negotiations between the UK and EU over the Protocol to continue. The EU argues that the UK has already failed to implement large parts of the existing Brexit deal, breaching the terms of the agreement. This process is unlikely to move quickly, but provides the EU with an option of escalating its response.

The EU’s response is likely to be limited to continuing negotiations and its legal proceedings for now, but a significant escalation can be expected in the event the Bill passes in its current form. The EU has been clear that it will trigger a full-blown trade war with the UK — something neither Johnson nor his chancellor Rishi Sunak wants in the middle of the cost-of-living crisis. Compromise remains in the interests of both parties, so the government will hope that the Bill will push the EU into changing its position, rather than expecting the Bill to pass in its current form.

Where do we go from here?

The government has sought to play down the scope of the Bill, with Boris Johnson labelling its proposals as “a trivial set of adjustments”. In reality, Johnson sought a more moderate version of the Bill after Chancellor Rishi Sunak and Health Secretary Sajid Javid raised concerns about the consequences of the original, more hardline version of the Bill proposed by Foreign Secretary Liz Truss. However, fresh from a bruising vote of confidence in which 41% of his party unsuccessfully tried to unseat him, Johnson has been forced to move back closer to the original proposals tabled by Truss. Johnson’s changing position is indicative of the political position he finds himself in. Weakened by the vote, Johnson will now be more vulnerable to the views of his own backbench MPs, making government U-turns – and inconsistent policymaking driven by their views – more likely.

The proposals are also extremely likely to have diplomatic consequences. The EU has warned that the Bill undermines trust between the two sides and makes finding a compromise harder. US President Biden has also warned that the UK’s actions make it less likely that a UK-US trade deal can be agreed. Although the UK’s actions are likely to cool UK-US relations, a trade deal was already unlikely, with lead UK negotiator Crawford Falconer admitting in May 2022 that negotiations had “stalled”.

Johnson is likely to find it extremely difficult to compromise on the Bill to break the impasse with the EU while retaining the support of pro-Brexit backbenchers. This, rather than legal challenges at home or in the EU, is likely to be the real flashpoint of the legislation. Johnson risks finding himself in the same position as former Prime Minister Theresa May, caught between the demands of the party and the need for a workable solution with the EU. The Bill begins the process of establishing whether he can find the solution Mrs May could not to the question of the Northern Ireland Border,  but is unlikely to settle it.

To discuss the government’s approach to the Northern Ireland Protocol, please email Lizzy Cryar on

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A day late and a dollar short? Unpacking Sunak’s bid for a global crypto hub

On 4 April 2022, Rishi Sunak announced the government’s ambition to turn the UK into “a global hub for crypto asset technology” as part of the Treasury’s plan to create a new crypto regulatory package.

The government’s headline proposal is to integrate stablecoins (cryptocurrencies linked to traditional currencies or assets) into the payments system, enabling people to use them like conventional currency. The government is also looking to explore ways to catalyse a domestic crypto asset market by making the UK tax system more “competitive”. The Financial Conduct Authority (FCA) plans to conduct an industry-wide consultation in May this year.

Speaking at a financial technology conference on 4 April, the Economic Secretary to the Treasury, John Glenn, said that the government is “going to prioritise” blockchain technology, and could even issue debt and borrow money using the approach. He pointed to the UK having fewer regulators than the EU and US which would enable the UK government to “move very nimbly” in achieving its goal.

However, the government’s renewed focus on crypto may come too little, too late for businesses in the rapidly growing sector, with many having already left for greener regulatory pastures following the FCA’s foray into crypto regulation.

Crypto businesses have faced a rocky road to FCA compliance so far

The FCA became the anti-money laundering and counter terrorist financing supervisor for crypto asset firms from 10 January 2020. Firms that were already operating in the UK prior to the date were directed to register with the regulator by 10 January 2021. Many firms were unable to complete the application process in time, which led the FCA to create the Temporary Registrations Regime (TRR). The regime enabled firms to continue trading if their application had commenced before 16 December 2020 and was still undergoing assessment.

From 10 January 2021, the FCA mandated all existing crypto asset businesses in the UK to be registered with the FCA, or in the process of doing so via the TRR, which was due to close in July 2021. However, delays by the regulator in clearing the TRR resulted in the deadline being extended to 31 March 2022, and then extended yet again – for applications of “all but a small number of firms” that still had not been fully processed. The FCA explained that delays in the registration process were a result of the complexity, and often poor standard of applications it receives, while also pointing to the impact of the pandemic in restricting the regulator’s ability to conduct visits to the companies for the earlier delays.

In January this year, Lisa Cameron MP, chair of the UK parliamentary group on crypto and digital assets, criticised the regulator in how “the lack of clarity from (it) has presented huge challenges to firms in terms of business certainty,” with firms “actively leaving the UK as direct result of the FCA’s approach, costing the UK in terms of jobs, talent and revenue.” Recent research from YouGov shows that growing number of companies are moving to other markets “to ensure they can continue offering crypto services to Brits, but from outside of the new UK regulatory regime,” as the FCA rules still allow companies to serve British clients from bases like Luxembourg, Germany, and Switzerland.

Speaking at a City Week 2022 event on 26 April, FCA chief Nikhil Rathi argued that many businesses fell short of the FCA’s standards for provisions to prevent and identify harm. He added that the regulator looks to work with firms to support their efforts towards compliance and that this “should not be interpreted as anti-innovation.” Blair Halliday from Gemini (a crypto exchange given the green light by the FCA), explained how the FCA’s approach “gave firms that really have that desire to seek regulatory approvals something to demonstrate as a key differentiator.”

The FCA announced a three-year strategy focused on improving outcomes for consumers earlier in April this year. The strategy directs the regulator’s Head of Digital Assets to “build and lead a new crypto department that will lead and coordinate the FCA’s regulatory activity in this emerging market” with, for the first time, published outcomes and performance metrics that the regulator will benchmark itself against. The strategy’s stated focus is on the prevention of serious financial harm for consumers, with online fraud and scams increasing in tandem with growing crypto ownership – latest research shows 1 out of every 5 people own some form of cryptocurrency today.

Will the government’s new approach finally provide the clarity crypto firms have been calling for?

Both policymakers and businesses have been openly critical of the speed and effectiveness of the FCA’s approach and its impact on the sector, with the back-and-forth between the regulator and the industry widely reported in the media as the final deadline for the TRR approached. Several of the UK’s best-known crypto businesses, including payments app Revolut and digital asset custodian Copper, were said to be left in limbo as they awaited the FCA’s verdict on their applications.

Peter Smith of, one of the UK’s most prominent crypto businesses, welcomed the government’s plans as a “course correction” but lamented how “more than 90% of the sector has left the UK for more progressive countries in Europe.” A similar sentiment was shared by Charles Hayter, of data provider CryptoCompare: “the proof is going to be in the pudding with how the government eases the blockages our industry has faced.”

Investors looking at businesses in the sector should note that while the Chancellor’s announcement may point towards a more flexible, pro-business approach to regulation, it came in stark contrast to the Governor of the Bank of England Andrew Bailey calling crypto the “new front line for scammers” while warning that fraudsters are exploiting digital asset technology, on the same day as Sunak’s announcement, reflecting the emphasis on consumer protection in the FCA’s three-year strategy. Despite the Chancellor confirming that the Treasury will look to work with the industry in developing the future regulatory framework, it is evident that the government must do more to ensure firms can “invest, innovate and scale up in this country.” The new new crypto regulatory package must instill confidence, not confusion, for businesses in the sector if the government’s dreams of a global crypto hub are to come true.

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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

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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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Too many cooks? Navigating change in apprenticeships policy

It may have only been two years since the government officially declared its apprenticeships reform programme over, but change is firmly back on the horizon. Spurred on by Ministerial interest from Chancellor Rishi Sunak and Work and Pensions Secretary Therese Coffey, apprenticeships, and the skills agenda more widely, is firmly in the sights of government.

While the planned reforms are unlikely to be on the same scale as those introduced under Cameron, the expectation remains that substantial changes will be made, with the aim of focusing on scaling up apprenticeship numbers and improving course quality. The government is under pressure to translate their ambitions into reality, particularly as the apprenticeship levy remains unpopular with employers. The Chartered Institute of Personnel and Development has found that only one fifth of employers think the levy is working well at present, with dissatisfied employers calling for a more flexible system that allows the funding to be used to pay for a wider range of training.

Ministerial interest, but no overarching strategy

Assuming the government is able to create the bandwidth it needs to take on new policy challenges, apprenticeships, and skill development more widely, will likely rank highly on its list of priorities. With direct interest from Rishi Sunak and ambitious manifesto commitments made by Prime Minister Boris Johnson, the skills agenda benefits from the attentions of the highest level of government. While this attention ensures that further education is never far from the top of the government’s agenda, it has not resulted in a coherent single strategy, with many of the key players in apprenticeships policymaking pulling in different directions. With the Department for Education, Treasury and now the Department for Work and Pensions all involved in policy development, this does not appear to be changing any time soon, nor does it suggest that the forthcoming round of reforms will be a straightforward one

The implications of this cross departmental interest played out in a very public way during the fallout from Rishi Sunak’s comments during the Spring Statement on 23 March, where he told the House of Commons he would “consider” whether the current tax system, including the operation of the apprenticeship levy, is “doing enough to invest in the right kinds of training”.  Sunak, inspired by the employer investment he saw while working in California, is keen to incentivise employer spending on upskilling their workforce, including through the introduction of tax credits and embedding more flexibility for employers in the system.

No sooner than Sunak had spoken the Department for Education were playing down the scope of any further change to the apprenticeships system. Having not been consulted, the DfE pushed back on any assumptions of widespread reform to the apprenticeships system.

This episode is telling for multiple reasons. First, Sunak clearly didn’t feel the need to inform the Department for Education of his plans in advance. This signals that the Department for Education is no longer at the centre of apprenticeships policy and may be further side-lined in terms of the forthcoming reforms. This suggests we are entering a period where employer focused reform – the clear centre of the Treasury’s focus – will be the key narrative driving the policy debate. Expect a focus on making the levy more attractive to employers and increasing incentives for employers to upskill their workforce.

The second is the force with which the DfE denied any reform would be taking place. Having only completed a period of substantial reform two years ago, the Department is keen to move to a ‘bedding in’ period to allow it to focus reform efforts elsewhere. Having just launched the Schools White Paper and SEND Green Paper, as well as dealing with the fall-out from the faltering education catch up programme, Education Secretary Nadim Zahawi will be unwilling (and likely unable) to launch another major reform effort.

Higher apprenticeships have seen growth, but there is still scope for lower level apprenticeships to close the gap

While the DfE may be unwilling to get involved with further reform of the apprenticeships system, one person very keen on the idea is Work and Pensions Secretary Therese Coffey. Apprenticeships as a means to upskill and retrain the workforce, reduce the number of individuals not in education or employment and increase the number of individuals able to improve their career prospects through training is of interest and may change the dynamic of any further tweaks to the system, including a potential move away from post-16 education and towards upskilling of the existing workforce and post-25 education. We are already seeing something to that effect take place –  there are now nearly twice as many over-25 year olds doing apprenticeships than 19-year olds.

Currently, this is leading to growth in demand for higher level apprenticeships, at the expense of lower levels. Fewer 16-19 year olds taking apprenticeships, as well as increased popularity of apprenticeships being used by working professionals to top-up their qualifications, is having a significant effect on the demographics of apprentices and the kinds of courses they undertake.  While this has had an effect on the uptake of lower-level apprenticeships, there is scope to rectify this. 8.5 million adults in England & Wales, equivalent to 30% of the working population – are qualified to Level 2 or below, something the government is keen to change. Expansion of apprenticeships uptake as a whole is the aim, and the Department for Education, while sidestepping any significant reform programme, will be keen to increase the uptake of low level apprenticeships, by both young people and working adults without these qualifications.

There has never been a quiet time in apprenticeships policy, but set against a backdrop of a major overhaul of the further education and skills agenda, apprenticeships are likely to remain a slowly evolving policy area over the rest of this parliament and in to next. The Chancellor is expected to announce next steps on his work to make apprenticeships more attractive to employers at the Autumn Budget, but ahead of this, it is possible that the government may include an indication of its policymaking in the upcoming Queen’s Speech in May 2022.   There is significant scope here for an expansion of the sector if the government can meet its policy aims, but all involved departments will have to work together to see real, coherent progress.

To discuss the government’s latest approach to apprenticeships reform, please email Lizzy Cryar on

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WA Investor Services supports LDC’s investment in Shaken Udder

WA Investor Services is delighted to announce that it has advised LDC on its successful minority investment in Shaken Udder, a premium milkshake company which supplies major retailers including Sainsbury’s, Tesco, Waitrose, Morrisons, ASDA, Co-op and Boots. LDC’s investment will support Shaken Udder’s management team to expand the business’s customer base, including into convenience stores, and to expand its product range. LDC will also support the business to focus on brand marketing and exploring international expansion.

WA Investor Services provided political and regulatory due diligence in support of the investment, drawing on our extensive network of policymakers to provide a detailed assessment of the policy outlook for Shaken Udder. WA’s insights gave considerable reassurance to LDC and were a key input to their investment decision.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “It has been a pleasure to have worked with LDC on their successful transaction. With our deep networks across the relevant policy areas, WA’s Investor Services practice were really well placed to support the LDC team in understanding the regulatory outlook for Shaken Udder. Their investment will undoubtedly represent an exciting new chapter for the business as it seeks to expand. We look forward to seeing it develop over the coming years.”

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WA Investor Services supports ECI and Bionic on its exit to OMERS Private Equity

WA’s Investor Services team is very pleased to have advised ECI and the Bionic management team on its successful exit to OMERS Private Equity.

Bionic is the leading marketplace in the UK for SMEs services, using its team of tech-enabled experts to match businesses with the best business energy, insurance, connectivity, and commercial finance solutions.

Using our unrivalled network of senior policymakers and officials in the UK, WA provided an in-depth analysis of the diverse markets in which Bionic operates, demonstrating the strength of the business’s approach in meeting its customers’ needs in a complex political and regulatory environment.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “It has been a pleasure to work with ECI and the exceptional Bionic management team on their successful transaction. WA’s Investor Services team was able to bring to bear our extensive network of key decision-makers were able to deliver a thorough assessment of the many different sectors relevant to Bionic. These insights and the wider intelligence gathered to inform our due diligence clearly demonstrates Bionic’s resilience to the challenges which those sectors may face in the coming years. We congratulate ECI and Bionic on a successful exit and look forward to seeing the business continue to flourish on the next stage of its journey.”


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WA Investor Services supports Trilantic Europe’s investment in Kantar Public

WA’s Investor Services team is delighted to announce that it has advised Trilantic Europe on its successful acquisition of Kantar Public, a global consulting business providing bespoke research services to governments and public-sector organisations.

Using our extensive network of senior policymakers and officials in the UK, and working with WA’s international partners across Europe and Australia, we provided an in-depth analysis of the regulatory and procurement landscape for large-scale and longitudinal population research services in government, as well as a detailed assessment of the political drivers for evidence-based policymaking in each territory.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “It has been a pleasure to have worked with Trilantic on their successful transaction. WA’s Investor Services team, and our international network of partners, have unrivalled access to key officials directly involved in procuring population research services in the territories we analysed for this project. We were able to bring this network to bear to help the Trilantic team understand the appetite for such services in government, and the demand for Kantar’s bespoke methods in shaping policy decisions. We look forward to seeing the business go from strength to strength in the coming years.”

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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:

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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NHS outsourcing to the independent sector: politicians vs the public

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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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A lifelong commitment? What to expect from the Lifetime Skills Guarantee

Skills are a key part of the government’s agenda, seen as vital for unlocking its ‘Levelling Up’ commitments in the light of skills shortages in areas like engineering, IT, and accounting. These shortages are long-standing. A 2018 study by the Open University found that skills shortages were costing UK companies £6.3 billion a year due to factors such as training and additional recruitment costs.

The government has acknowledged these shortages, and the need to ensure the education and training system is able to cope with the ever-increasing demands placed on it. In a foreword to the January 2021 White Paper on skills, the then Education Secretary Gavin Williamson indicated that more opportunities for training needed to be made available. As part of its response, the government has introduced a new policy – the Lifetime Skills Guarantee. It hopes that this initiative will address changing skills needs and employment patterns by giving people the opportunity to train and retrain throughout their lives.

What is it?

The Prime Minister announced the Lifetime Skills Guarantee in a September 2020 speech. The scheme covers a lot of ground policy ground. Pledges include increasing investment in FE colleges, introducing a lifelong loan entitlement, and a new funding system for higher technical courses. Only two policies, however, are being funded by the National Skills Fund: a new Level 3 qualification offer for adults and the extension of digital skills bootcamps.

The qualification offer, which commenced in April 2021, aims to give all adults without a Level 3 qualification (equivalent to A level) access to a fully-funded course. Previously, only adults under the age of 24 could access funding. The courses are taught by a range of state and private providers.

The government maintains a list of eligible courses, with 379 currently listed, and has made digital, engineering, health, and construction qualifications a clear priority with 37, 51, 54, and 66 courses available respectively. Whilst course lists are subject to review, investors in training providers that deliver these courses are likely to be particular beneficiaries of the scheme.

A high priority, and a long-term solution for a long-term problem

The Lifetime Skills Guarantee tackles big challenges, and the government has devoted significant effort to implementing it. The Guarantee was referenced multiple times in last month’s Budget, which also included a wider commitment to increase spending on skills by £3.8 billion by 2024/25 – a cash increase of 42% compared to 2019/20. These are not small pledges. The government has expended serious political capital on addressing the problem of skills shortages and, given this emphasis, is likely to release further funds in future years to support the scheme.

Announcing the Guarantee, the Prime Minister also made clear that the initiative is intended as a long-term scheme, rather than a short-term remedy to fill immediate skills gaps – that the nature of learning demands time and resources. He suggested that other countries have had an advantage over the UK when it comes to skills and technical education “for 100 years”. Indeed, the government’s Skills and Post-16 Education Bill confirmed that the planned rollout of the Lifelong Loan Entitlement, another major Guarantee commitment and one that aims to make it just as easy to secure loans for higher technical qualifications as for full-time degrees, remains over three years away in 2025.

Considering the CBI’s October 2020 analysis that predicted around 90% of employees would need to reskill by 2030, if the government is serious about this issue– and all indications suggest it is – then funding for initiatives like the Level 3 offer is likely to be enduring. The fact that only £375 million from the £2.5 billion National Skills Fund has been allocated for 2021/22 reinforces this. There are an estimated 11 million people who would be able to access the free qualifications under the Level 3 offer. Given the political weight the government has placed on these Level 3 offers – literally labelling them a ‘Lifetime Guarantee’ – the £95 million that is currently funding courses over 2021/22 is very likely to represent a prelude to further funding in the future.

The outlook for investors

The Lifetime Skills Guarantee is a key piece of the government’s education agenda. Both the Prime Minister and the Chancellor have been personally involved in its roll-out and have alluded to long-term planning happening in this space. This suggests that scheme will benefit from ongoing investment, particularly in sectors which government has identified as priorities. Technicians, engineers and social care professionals are consistently namechecked by ministers as occupations that the country lacks, and current course lists reflect this. Providers with speciality in these areas look set to benefit from the increased demand that funding from the scheme is likely to stimulate. As a result, investors in the technical education sector will want to monitor the government’s developing thinking closely in order to identify potential opportunities from future funding allocations for the scheme.


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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:

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:

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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WA Investor Services supports Agathos’ investment in Hunter Healthcare

WA Investor Services is proud to announce it has supported Agathos’ acquisition of Hunter Healthcare, a specialist recruiter working across the healthcare and life sciences sectors. The investment will help support Hunter’s ambitious growth plans, providing vital staffing solutions to healthcare providers and medical researchers, including developing its offer in international markets.

WA provided political due diligence to support the transaction, with its team of healthcare policy experts providing insights integral to the deal process, working closely with Agathos and other due diligence providers to deliver clarity on how ongoing structural changes to the NHS, the elective recovery and acceleration of the digital transformation agenda will affect healthcare recruitment decisions and priorities.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “We are extremely pleased to have worked with Agathos on this deal. NHS staffing is a very high-profile issue at the moment and ensuring the NHS meets patient demand while undertaking fundamental system reform is a priority for political and NHS leaders, not least as they tackle the post-Covid backlog. As a market leading provider of political due diligence in healthcare transactions we were in an extremely strong position to support Agathos’ successful deal and we look forward to seeing the business develop over the coming years.”

Hugh Costello, Investment Director at Agathos said: “WA Comms produced a comprehensive report with insightful conclusions that were well supported by desktop research and interviews with sector participants. The team was available for calls as and when required and were always a total pleasure to deal with. Ultimately, the output produced by WA was instrumental in our decision to complete our investment. I would recommend their services wholeheartedly.”

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WA Investor Services supports Livingbridge’s investment in Everlight

WA Investor Services is proud to announce it has supported Livingbridge’s acquisition of Everlight, an innovative 24-hour teleradiology business. Livingbridge’s investment will help support Everlight in building its pool of exceptional radiologists, driving technological innovation and propelling international growth.

WA provided political due diligence to support the transaction, with its team of specialist political risk analysts assessing the impact of structural changes in the NHS on the business, NHS strategies for recovering from the Covid-19 pandemic, and the potential implications of long-term workforce and technological issues affecting the sector.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “We are extremely pleased to have worked with Livingbridge on this deal. Everlight is very well placed to assist the NHS in delivering cost-effective, high quality services and providing much needed capacity at a time when the health service is experiencing unprecedented demand.  Our market leading expertise in the health sector put us in a strong position to support Livingbridge’s successful deal and we look forward to seeing the business develop over the coming years.”

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WA Investor Services supports Livingbridge’s investment in AJM Healthcare

WA Investor Services is proud to announce it has supported Livingbridge’s investment in AJM Healthcare, a leading provider of NHS wheelchair services. The investment will help support AJM’s continued growth, enabling more users to benefit from its innovative, comprehensive and tailored solutions.

WA provided political due diligence to support the transaction, drawing on its market-leading expertise of evolving NHS commissioning policy, changes to the government’s procurement processes, and the wider reform agenda for health and social care. This insight was supported by the views of key decision makers and policy influencers from across WA’s extensive network.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “We were delighted to support Livingbridge on this deal, at a time when the NHS is going through a substantial period of change. The restructuring of the commissioning process and the government’s wider focus on reform in the sector will have a significant impact on all businesses working in health and social care. WA’s deep network in both government and the NHS has informed our understanding of what the new landscape will look like and allowed us to generate valuable insights for Livingbridge. Our congratulations to everyone involved in the deal; we look forward to seeing AJM go from strength to strength in the years ahead.”

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WA Investor Services supports Connection Capital investment in Mr Pickford’s pharmacies

WA Investor Services is proud to announce it has supported Connection Capital’s acquisition of Mr Pickford’s, an innovative community pharmacy business. The investment will help support Mr Pickford’s expansion plans, taking advantage of its market leading use of technology to deliver high quality services to patients.

WA provided political due diligence to support the transaction, with its team of specialist political risk analysists assessing the enhanced role of pharmacies as a partner in public health policy, as well as the outlook for funding in the sector in light of the evolution in government expectations of pharmacy services.

Miles Otway, Partner at Connection Capital said: “The WA Communications team delivered an excellent piece of work that provided insight for both Connection Capital in our deal assessment process but also the management team as they think about the shaping of their offering to patients to align with the wider central government and NHS priorities. We have already engaged WA Communications on another due diligence exercise and look forward to working further with the team.”

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “We are extremely pleased to have worked with Connection on this deal. The pharmacy sector is undergoing a period of transition, driven by changing government policy and a renewed commitment to disease prevention in the NHS.  Our market leading expertise in the health sector put us in a strong position to support Connection’s successful deal and we look forward to seeing the business develop over the coming years.”

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Lizzy Cryar to speak at the German Association for Political Consultants (DeGePol) young professionals annual conference

WA is proud to announce that Senior Account Manager Lizzy Cryar will be a speaker at the German Association for Political Consultants (DeGePol) young professionals annual conference on Saturday 15th May. Lizzy is currently chair of the PRCA NextGen PA committee, representing public affairs consultants in the UK in the first decade of their careers.

The conference will hear from five speakers from across Europe, who will discuss how the Covid-19 pandemic has affected politics and public affairs in their home countries. Lizzy will be sharing her analysis on how Covid-19 has affected public perceptions of the government and opposition in the UK, the future of the union, and the ongoing debate over the need to reform lobbying regulations in light of high profile news stories involving former politicians.

Commenting ahead of the conference, Lizzy said: “I’m incredibly proud to be representing WA and the PRCA at the DeGePol young professionals conference this year. The Covid-19 has had a huge impact on politics across the UK and I’m delighted that I have been asked to share my thoughts on the subject.”

Lizzie Wills, Partner at WA Communications said: “Lizzy is a superb political analyst and her reflections on the impact of Covid on the UK environment will be hugely useful for all the delegates at the DeGePol conference. Unpacking the many different political dynamics at play in the UK at the moment takes a really mature and nuanced reading of the political forces at work – DeGePol is in safe hands with Lizzy, whose insights and analysis are second to none.”

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WA Investor Services Supports Cairngorm Capital investment in E-zec Medical

WA Investor Services is proud to announce it has supported Cairngorm Capital’s investment in E-zec Medical, England’s largest independent provider of Non-Emergency Patient Transport Services. The investment will help support E-zec medical accelerate its growth and allow it to strengthen its data capabilities to deliver enhanced performance and innovation to commissioners and patients.

WA provided political due diligence to support the transaction, drawing on its market leading expertise of NHS commissioning policy and the government reform agenda for health and social care. This insight was supported by the views of key decision makers and policy influencers from across WA’s extensive network.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “We were really pleased to support Cairngorm Capital on this deal. The NHS is going through a period of significant change, transforming its structure and approach to commissioning, which will affect all businesses operating in health and social care. Our deep networks across government and the NHS, and our understanding of how the next round of structural reform will impact the commissioning landscape allowed us to generate valuable insights for the Cairngorm team. Congratulations to everyone involved – we look forward to seeing the business grow over the coming years.”

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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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WA shortlisted for legal, compliance & regulatory consultancy of the year 2022

WA is proud to have been shortlisted as a finalist for the legal, compliance & regulatory category at the 2022 Drawdown Awards.

WA’s Investor Services team has established a reputation for providing the gold standard in political risk analysis. Our team give up-to-the-minute advice to clients and uses its unrivalled political network to go beyond the headlines to share the deepest policy insights and the most accurate, actionable advice for clients.

Investors look to WA Investor Services for in-depth and nuanced analysis of the political dynamics impacting their decisions. We help our clients understand risks, forecast and scenario plan, and provide ongoing intelligence gathering to track issues.

WA Partner and Head of Investor Services Lizzie Wills said: “We are incredibly proud to be finalists in the legal, compliance and regulatory advisory category at this year’s Drawdown Awards. 2021 was a year of rapid expansion for the WA Investor Services team. Despite ongoing challenges for investors as a result of Covid-19, WA built relationships with new clients, expanded our geographic reach, and invested in our own services to deliver a sophisticated, data-driven offer which met evolving client needs.”


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WA shortlisted for Political Due Diligence Provider Of The Year 2022

WA is proud to have been shortlisted for Political Due Diligence Provider of the Year at the 2022 Private Equity Awards.

Over 2021 WA cemented its reputation as the gold standard in political risk analysis. Our team gave up-to-the-minute advice to clients and used its unrivalled political network to go beyond the headlines to share the deepest policy insights and the most accurate, actionable advice for clients.

Investors look to WA Investor Services for in-depth and nuanced analysis of the political risks impacting their decisions. We help our clients understand risks, forecast and scenario plan, and provide ongoing intelligence gathering to track issues.

WA Partner and Head of Investor Services Lizzie Wills said: “We are incredibly proud to be shortlisted for Political Due Diligence Provider of the Year. 2021 was a year of rapid expansion for the WA Investor Services team. Despite ongoing challenges for the investment community as a result of Covid-19, WA built relationships with new clients, expanded our geographic reach, and invested in our own services to deliver a sophisticated offer which met evolving client needs.”


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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


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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WA Investor Services Supports GCP investment in Hippo Digital

WA Investor Services is proud to announce it has supported GCP’s investment Hippo Digital, a digital transformation specialist working across the public and private sector. The investment will help support Hippo’s ambitious growth plan, including meeting a goal of doubling its workforce over the next three years.

WA provided political due diligence to support the transaction, with its team of specialist political risk analysts assessing digital transformation policy across Whitehall and the NHS, as well as reviewing recent and ongoing changes to procurement guidance. This insight was supported by the views of key decision makers and policy influencers from within government, parliament and the NHS.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “We are extremely pleased to have worked with GCP on this deal. How government views procurement across the public sector post-Covid will impact businesses in a variety of sectors, from digital transformation to health and social care. Our deep networks and expertise in navigating decision makers’ approaches to decisions in this area put us in a strong position to support GCP’s successful deal and we look forward to seeing the business develop over the coming years.”

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WA Investor Services Supports Chatsworth Schools expansion

WA Investor Services is proud to announce it has supported Synova backed Chatsworth Schools successful acquisition of Riverston School and Beech Hall School from The Riverston Group. The Riverston Group is a privately owned education group, known for providing a mainstream educational environment with the highest levels of pastoral care, for children with moderate and mild learning needs. The acquisitions take the number of schools and nurseries in the Chatsworth Schools family to fourteen.

WA provided political due diligence to support the transaction, with its team of specialist political risk analysts assessing the SEND policy outlook in light of the ongoing government SEND review and reviewing the funding landscape. This insight was supported by the views of experts from across the sector, representing national and local government, parliament, the private sector, and the third sector.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “We are extremely pleased to work with Chatsworth Schools and Synova to support their expansion. WA is recognised as a leading provider of political due diligence to support transactions in the education sector and we look forward to our future work in this area.”

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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 31st 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 30th April.

Alongside these wider measures, hospitality and leisure have benefitted from a 5% cut in VAT from 15th July 2020. This has now been extended until 31st 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 3rd 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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How to capitalise on the Super Deduction tax benefit

This roundtable was originally published by Real Deals and features WA’s Head of Investor Services, Lizzie Wills. Please find the original here.

In the wake of the UK Spring Budget announcement, Rhiannon Kinghall Were, head of tax policy at Macfarlanes and Lizzie Wills​, head of investor services at WA Communications, discuss how GPs can take advantage of the Super Deduction tax benefit.

Rhiannon Kinghall Were, head of tax policy at Macfarlanes

The Super Deduction was the surprise in the Spring Budget. There was the expectation around an increase in the rate of corporation tax, which has now increased to 25 per cent as the rumours suggested, and the hike in the rate has been tempered by this new investment incentive. The announced Super Deduction should be a significant incentive to businesses, because not only do they get a deduction for the full cost of investments made in the year of acquisition, but they also get an additional 30 per cent, making it a total of 130 per cent that can be deducted against profits. However, as the Super Deduction is only temporary in nature, companies will feel the full impact of the increase in the rate of corporation tax in 2023.

Unprecedented tax policy

From a global policy perspective, it is unusual that they’ve opted for this measure, I haven’t seen any other country go over 100 per cent before. By way of example, through the Super Deduction if a business makes an investment in plant and machinery of £10m then they get a deduction from their profits of £13m. That provides a potential tax saving of £2.47m.

In terms of where the Super Deduction will impact the PE industry, it will largely be the portfolio companies that invest heavily in ‘plant and machinery’ who will benefit. Many operators in manufacturing, infrastructure, pharmaceuticals and biotech, will be the largest benefactors. Interestingly when you look at total capital allowances claims the financial services sector takes third position, following manufacturing and retail.

Just what is classified as ‘plant and machinery’ isn’t actually defined in legislation but most tangible assets used in business should qualify, whether that’s robots on production lines in factories, electric vehicle charging points or simply computer equipment. If a company is buying new software platforms to be used in business, then that would also qualify. One thing to note is that these deductions do not extend to actually buying a property.

Act quickly

While the 130 per cent deduction is very novel, the extent to which companies will be able to benefit will depend on their circumstances and where they are in their investment cycle.

For instance, the Super Deduction can only be made on new contracts entered into after the budget date. If you had already signed contracts to purchase new equipment that investment would not qualify, as the investment was effectively made before the Super Deduction came into play.

The biggest limitation of the policy is the short window of time. The incentive is only available for two years, from 1 April 2021 through to the end of March 2023. It’s a short timeframe to make a big difference. There is also the caveat that it has to be new items, you cannot deduct the purchase of second-hand items which is significant for manufacturers where there is a good market for second-hand equipment and machinery. My advice to businesses would be to look down the pipeline of where the business is going, if there’s any investments or purchases that you can bring forward now is the time to do it.

Lizzie Wills​, head of investor services at WA Communications

As political risk specialists, WA supports investors and their management teams to understand the often-contradictory messages coming out of government. The last twelve months have shown just how important it is to be able to read these signals, to interpret them, and to be in the strongest possible position to mitigate the risks and capitalise on the opportunities they represent. The Budget has been no exception, and the Super Deduction is a case in point. The announcement has raised several questions about the government’s intentions, not least: What does the announcement tell us about how the government plans to balance the books post-Corona? How is the Treasury going to pull off its ‘spend now, pay later’ promise but minimise the pain that both businesses and taxpayers face in the coming months and years.

Hey Big Spender

The Chancellor’s Budget announcement on the Super Deductions benefit was one of the few that had escaped the extensive media pre-briefing. The Chancellor was understandably keen to soften the ground for many of the planned announcements, not least that the government’s intention to increase corporation tax to 25 per cent in 2023.

Getting to the bottom of the Treasury’s thinking, at least on the face of it, is pretty straightforward. Through measures like the Super Deduction, the Treasury is hoping to supercharge businesses’ appetite to invest – to the tune of £25bn – and to spur on the post-Corona recovery.

It’s an eye-catching pitch, with businesses previously reticent to invest in new plant and machinery potentially now having the impetus to do so. The Government will also be hoping that as an added benefit it supports their headline domestic priority to ‘level up’, given its the big manufacturing firms located outside London and the South East that are most likely to benefit.

What’s the catch? 

There are questions already about whether the Super Deduction is the best way for the Government to spend £25bn. Arguably the majority of the companies benefitting from the tax relief would be making these investments anyway.  It will also add another layer of complexity to a tax regime that already runs to thousands of pages. Not only that, but there are strict eligibility criteria which means that not all firms will be able to access the relief, super deductions are only available to companies subject to corporation tax. Therefore those facing the 25 per cent rise in 2023. Sole traders, partnerships and LLPs are not eligible.

The deduction is also only available for new plant and machinery, rather than second-hand equipment. There may also be additional criteria that firms must meet if they are intending to purchase plant and machinery under a hire purchase agreement, which is pretty standard for SMEs.

A further restriction is the tightly defined period for accessing the deduction, meaning that some businesses might inadvertently miss out. Any investment committed to, ahead of 1 April 2021 won’t be eligible for the relief, and any delays between signing new contracts and incurring costs may have implications for what qualifies as tax deductible expenditure under the new scheme.

Mark Bryant, head of manufacturing at BGF

“Specific improvements in capital allowances that encourage manufacturers to invest in equipment will ultimately improve productivity and competitiveness both internationally and domestically. It is a positive move for the UK economy at large. For many businesses across the country that have faced severe disruption over the last year and are confronting the big challenge of rebuilding their balance sheets, there are still concerns that they may not have the flexibility to make significant capital investments at this time. It will be important to continually assess the extent to which smaller companies are utilising these new tax incentives.”

Simon Wax, partner at Buzzacott 

“The main question for PE firms should be how much do tax deductions influence their buying decisions. Arguably the underlying performance of the business is more significant, however, paying less tax will clearly improve the cash flow forecasts for companies which could be another catalyst for PE houses to get more deals approved in the short term. Another opportunity for PE firms would be where they are looking at buy-and-build strategies that would require their portfolio investment companies to invest in order to see growth and realise returns.”

Andrew Aldridge, partner at Deepbridge Capital.

Growth-focused businesses will ultimately be the backbone of economic recovery. Investors will be working with portfolio companies to assist them in utilising Super Deduction and growth schemes which can assist with either short-term working capital or longer-term growth capital. The past twelve-months have seen unprecedented UK Government initiatives for supporting businesses which, coupled with longer-term initiatives such as the EIS, make the UK one of the best places to scale a business.”

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What the delayed Budget means for investors

Last week the Chancellor Rishi Sunak announced that the Budget, due to take place in either late November or early December, was being postponed due to the economic uncertainty caused by the increase in cases of Covid-19. While no new date has been set for the Budget, it is now likely to be held by the end of March 2021. Crucially for the investment community, this means another six months before business taxes, including Capital Gains Tax (CGT), potentially go up.

The postponement of the Budget is useful for Rishi Sunak, giving him more time to assess the state of the economy, before setting out his plan to repair the public finances, but it is just as useful for investors. The extra four months allows them to take advantage of the current tax regime when planning their short-term investment and exit strategies.

The Chancellor has made an important political decision. Debt repayment is – for the time being at least –  manageable, and aggressive tax rises will damage whatever economic recovery is underway. He’ll be disinclined to introduce sweeping tax increases across the board to address the deficit while this remains the case. However, he needs to give some red meat to the more fiscally conservative parts of the party, and that means Sunak may make a calculated decision to introduce targeted tax increases to begin the process of putting the country’s finances on a more sustainable footing.

A rise in CGT is a likely candidate. Prima facie, a rise in business taxes flies in the face of traditional Conservative neo-liberalism, but the party has painted itself into something of a corner by promising in its last manifesto not to raise personal taxes (income tax, National Insurance and VAT). The idea of abolishing the triple lock on pensions has also been stamped on by No.10, so the Chancellor’s room for manoeuvre is limited.

Capital Gains Tax

Should the Budget have gone ahead this autumn, investors would have only a very limited time period in which they could have disposed of assets without being subject to a new higher rate of CGT. While the Chancellor’s plans for CGT have not been finalised, there is the possibility rates could be increased in March so as to achieve parity with income tax bands, representing a significant increase in the tax liability for investors. Even if the Chancellor does not opt for parity with income tax bands, the likelihood is that CGT will increase. The delayed Budget has opened a window of opportunity for exits to take place ahead of the planned increase in CGT, providing considerable tax benefits to investors.

Over the longer-term, changes to CGT are also likely to have implications for carried interest payments. Currently taxed at 28%, any increase in CGT will bring tax rates for carried interest closer to income tax bands. While the timing of the Budget makes little difference to this issue, the six months in the run-up to the next Budget will afford investors the time to plan their tax affairs accordingly in line with a new higher rate of taxation.

Buy-to-let market

The increase in CGT will also have an impact on individual sectors. In particular, the prospect of increasing CGT in spring 2021 could motivate a sell-off of buy-to-let assets. While the housing market remains buoyant, house prices increased by 5% in the year to September 2020 according to Nationwide, the same is not true for rents. Hamptons International forecasts rents to fall nationally 1% this year and next, with London set for even greater reductions.

The delay to any increase in CGT will mean property owners can potentially take advantage of a housing market inflated by the Stamp Duty holiday while avoiding more punitive taxes down the line. Investors, however, will have to act quickly, with many property agents reporting that they are operating at full capacity, causing a lengthening of the time it takes to complete transactions.

The postponement of the Budget has given both investors and the government time to think. With the economy having been through one of the most tumultuous periods in living memory, there is little chance of things returning to normal any time soon. But for six months, things are staying as they were (fiscally speaking at least), and investors should use this time wisely.

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Brexit explainer – what is the Internal Market Bill and why does it matter?

For avid Brexit-watchers, the headlines from the past week may seem like the country has been transported back to October 2019. With restless backbenchers, strongly worded statements from EU Chief Brexit negotiator Michel Barnier, and journalists running to the nearest legal expert, Westminster is suffering from a collective case of déjà vu. For those just tuning back into the Brexit negotiations, here’s what you need to know.

What is the Internal Market Bill?

The Internal Market Bill is intended to create a framework for trade to operate across the four UK nations post-Brexit. The Bill attempts to ensure the whole UK operates as its own single market. It would establish two legal principles – mutual recognition and non-discrimination – to ensure there are no new barriers for businesses trading across the UK, allowing a good or service to be sold anywhere in the UK without any internal standards blocking the movement of goods.

Why is the Bill so controversial?

The principal issue is that the Bill would reverse the Northern Ireland protocol contained in the Withdrawal Agreement, which was signed by Boris Johnson and passed by the current Parliament on 24 January 2020. The protocol settled the issue of post-Brexit trade across the Irish border by applying some EU customs regulation to goods travelling between the rest of the UK and Northern Ireland to avoid checks at the Irish border. The Bill would contravene the Agreement in three ways:

  1. It gives ministers powers to not to apply EU standards on paperwork for goods leaving Northern Ireland going to the rest of the UK.
  2. It gives ministers the power to disapply or modify state aid rules in Northern Ireland, which the Withdrawal Agreement stated would continue to be governed by EU state aid rules. Those powers also allow the UK Government to ignore decisions of the European Court of Justice and EU legislation on state aid.
  3. It would prevent individuals from enforcing the provisions of the Withdrawal Agreement in UK courts by stating the measures in the Bill are ‘not to be regarded as unlawful on the grounds of any incompatibility or inconsistency with relevant international or domestic law’.

The second issue with the Bill is the decision to apply mutual recognition to the devolved nations without their consultation. Mutual recognition means goods lawfully produced in England according to English standards can be sold in Scotland, even if Scotland has higher (and thus more expensive) standards. This means the devolved nations are not allowed to exclude goods from other UK nations made to lower standards, undermining their ability to set their own regulations.

What has the reaction been?

Reaction has been strong from both sides of the Brexit debate, fuelled by Northern Ireland Secretary Brandon Lewis admitting in the Commons that the Bill ‘does break international law in a specific and limited way’. Domestic opponents of the Bill suggest that it will damage the UK’s international reputation, preventing it from being taken seriously when addressing illegal acts conducted by other nations and making trade talks harder.

Scottish First Minister Nicola Sturgeon has described the Bill as an “assault on devolution”, an accusation that is unlikely to hurt the SNP’s standing going into the Scottish Parliamentary elections next year. Sturgeon has now pledged to campaign to demand a new independence referendum as “the only way to protect the Scottish parliament from being undermined and its powers eroded”.

The European Commission has threatened the UK with legal action and trade sanctions if it does not withdraw the controversial clauses in the Internal Market Bill by the end of September. Irish Taoiseach Micheál Martin has also personally criticised the Bill, stating that he is now pessimistic about the chances of agreeing a trade deal with the UK. Despite this, the EU has no intention of immediately shutting down  its talks on the UK/EU future-relationship, saying it would amount to falling into a trap set by the UK.

Across the Atlantic, US Speaker Nancy Pelosi has warned that there is “no chance” of the US signing a trade deal under a Biden presidency if the UK goes ahead with the Internal Market Bill in its current form because it undermines the Northern Irish peace process.

Why has the government done this?

The government has stated that the Bill is merely its way of tidying up “loose ends” in the Withdrawal Agreement that it says were caused by passing the Agreement “at speed”. The policy is described as a ‘safety net’ by ministers, to protect Northern Ireland’s position if a deal on future relations with the EU cannot be reached.

The UK has also claimed Michel Barnier has threatened not to include the UK on the list of “third countries” on food standards, which would effectively make it illegal to move food from Great Britain to Northern Ireland.

This defence has been met with scepticism by political commentators, the EU and some UK politicians, who believe the UK Government is either trying to force more concessions from the EU, attempting to force the EU to walk away from negotiations or simply did not realise the implications of the Withdrawal Agreement during the negotiations.

Of course, more than one of these reasons can be true at the same time, and it is entirely possible the UK Government feels it is a necessary action to take to protect trade with Northern Ireland, while also using the Bill as a way of shaking up, or perhaps deliberately destabilising, the trade talks.

What happens now?

The government has told the EU it doesn’t intend to withdraw the Bill, meaning it will be debated in Parliament. Conservative MP Bob Neill has tabled an amendment that would give parliament a veto on any decision to breach the Withdrawal Agreement. A significant number of other amendments are also expected. The passage of any amendment would require a significant Conservative rebellion, as well as the support of Labour, the SNP and the smaller opposition parties.

The Bill must also pass in the House of Lords, where it has been widely condemned, including from Conservative peers. The Lords are highly unlikely to block the Bill but may introduce amendments to force the Bill back to the Commons. It is almost certain to back any amendments passed in the Commons designed to water down the Bill. The Bill can’t pass into law until both Houses pass the same version of the Bill in full.

What happens if the Bill passes?

The passage of the Bill in its current form is likely to cause a serious impasse between the UK and the EU. European Parliament leaders, representing a majority of MEPs, have issued a statement declaring they will block the EU-UK trade deal if there is any breach of the Withdrawal Agreement. This marks a line in the sand from which neither side is backing down and makes the possibility of leaving the transition period without a trade deal significantly higher.

While it is highly unlikely the Bill will be voted down, it may be passed with amendments that either remove or significantly waters down the current provisions. The government is considering implementing sanctions, including a ‘nuclear option’ of withdrawing the whip from rebel Conservative MPs.

The Bill also has implications for the union. The Scottish and Welsh Governments have set out strong opposition to the Bill and with Scottish Parliamentary elections on the horizon in 2021, the Bill is set to further provoke anti-Westminster sentiment among Scottish nationalists. Polls have consistently shown a majority in favour of Scottish independence since the onset of the coronavirus pandemic, and this Bill is likely to cement opposition to the current Westminster Government in Scotland.

The matter may well be settled in the courts. Although the UK Supreme Court is unlikely to have jurisdiction over the issue due to parliamentary sovereignty, the EU may choose to take the case to the European Court of Justice which has jurisdiction over the interpretation and implementation of the Withdrawal Agreement.

Whatever happens over the next week, the UK Government has chosen a provocative approach that will have significant implications for the outcome of the UK-EU trade negotiations, its relationship with its own MPs, the strength of the union and its international reputation.

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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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On the front foot: How the insurance sector can tackle reform and reputation

With all aspects of the insurance market currently facing the twin challenges of reform and reputation, the sector should take advantage of the delays to Financial Conduct Authority (FCA) action to get ahead of future market intervention and launch transformational change.

Pre-covid, change was on the horizon

The FCA launched an investigation into general insurance pricing, focusing on home and motor insurance in October 2018. The investigation was launched following campaigning against practices in the general insurance market, culminating in Citizens Advice making a super-complaint about loyalty pricing to the Competition and Markets Authority (CMA). Concerns about treatment of vulnerable customers, in addition to the transparency of insurance premiums and the ‘loyalty penalty’, where customers face higher charges for remaining with their provider over the long term, were cited by the CMA and FCA prior to the launch of the investigation. The final report was due to be published in Q1 2020 but has been delayed, along with the majority of its open investigations, to “beyond June 2020” due to coronavirus. With the FCA planning significant reforms, insurers should use the extra time to adapt their business models to minimise the impact of the measures when they are eventually introduced.

On 4 October 2019, the FCA published the interim report of its market study into the pricing of home and motor insurance. The report concluded that customers who do not switch insurers regularly pay more for cover, but that many firms have introduced significant barriers to switching, suppressing competition in the sector. Interventionist remedies are likely to be on the way, with the FCA currently considering a ban on auto-renewal of contracts, alongside a requirement to put all customers on the best value plan available to them. Another option currently under discussion is limiting or banning margin optimisation, or only allowing new business discounts where the discount is transparent and fully removed after one year.

Intervention in pricing practices could have significant consequences for the insurance industry. Auto-renew policies in particular, where insurers’ pricing practices mean premiums are raised year on year at the point of renewal, are likely to be targeted. The consequences for the industry are likely to be a decline in renewal rates and margins; a reduction in customer renewal tenures; a decline in new business discounting; and a disruption of the broker market.

For insurers that can pivot to a business model based on driving new business, rather than retaining existing clients through current structures, the transition will bring opportunities to increase market share at the expense of more slow-moving players. However, the impact of coronavirus has also brought fresh challenges to the sector that will have to be addressed.

Covid is likely to compound the need for reform in the insurance sector

The coronavirus pandemic has led to widespread criticism of the insurance sector across multiple specialisms. With the FCA already clear that the sector was not working well for consumers, issues around miscommunication of business interruption insurance and travel insurance coverage will only serve to drive home that perception. While there is no suggestion the insurance sector is running outside the boundaries of current regulatory standards, questions are arising over whether the sector should be more tightly regulated than first thought.

The FCA is currently taking a test case to the Supreme Court to provide legal clarity on business interruption insurance. The FCA previously wrote to insurers in April explaining that it believes most business interruption policies do not provide cover for losses related to the Covid-19 pandemic. Its decision to seek legal clarity is likely driven by the extensive public criticism of insurers during the pandemic, and the number of businesses currently taking their own legal action. While it is likely the FCA’s instincts on the legality of insurers behaviour will be proved right, this is unlikely to exempt the sector from significant reputational damage, particularly as businesses continue to struggle with the economic effects of the pandemic.

The insurance sector should be mindful of the reputational challenges it faces

With legal cases and negative news coverage piling up, insurers are going to need to do more than simply restate the terms of insurance policies if they wish to avoid longstanding reputational damage to the sector. The ongoing debate over the legalities of denying business interruption insurance payouts to businesses is ongoing, however, the growing perception of the sector is increasingly of one that is not focused on consumers.

Insurers are aware of the mounting challenges. Two-thirds of insurers surveyed in May 2020 by FWD Research believe that the industry has damaged its reputation through its coronavirus response. The question now is what the sector can do about it. Coronavirus has exposed a significant expectation gap between insurers and their customers, compounded by a traditionally hands-off approach to customer service and auto-renew policies that require minimal customer engagement.

Preparation is key to minimizing the impact of change

The FCA has made it clear that it is willing to enact transformational reforms on the insurance sector that will dramatically increase transparency and, for some insurers, fundamentally alter the way in which they do business. While the coronavirus pandemic may have delayed the publication of the FCA’s final rulings, insurers should not take this as an indication that the FCA has lost interest and instead begin preparing now for the likely changes that will be enacted.

The negative media coverage during the pandemic is likely to focus political and regulatory attention on the insurance industry once again. Insurers should prepare now for more scrutiny going forward and should consider developing a targeted communications plan to demonstrate that they have listened to the concerns raised over the past few months, and what they will do to help lead change in the industry going forward.



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Connect Four: Choices for fiscal stimulus and what it means for investors

For an unabridged version of this article please visit Real Deals.

With the economy facing its worst crisis in generations and unemployment figures increasing at an alarming rate, the government is preparing a number of measures to help the economy recover. The Chancellor Rishi Sunak will deliver a ‘fiscal event’ in July, which will set out the immediate steps the government is taking to boost the economy. It is expected that a full Budget will follow in the autumn once the government has a better idea of which parts of the economy are in need of further support.

With rumours the government is considering a temporary decrease in VAT, we take a look at four potential measures the government could implement to kick-start the economy and what they would mean for investors:

A temporary VAT cut

Top among the Treasury’s options is a temporary cut to the rate of VAT. The thinking behind this move is that it could encourage a nervous public to start spending in shops, restaurants and pubs. The move would be good for consumers and investors alike, encouraging spending and increasing the revenues of firms hit hardest by the crisis.

The problem with the plan is that it’s expensive and it might not work. If people aren’t spending because they are scared of contracting or spreading the virus, a small adjustment to VAT is unlikely to encourage them to start spending. Also, the Institute of Economic Affairs estimated the government loses £7 billion of revenue for every percentage point it reduces VAT. That is a lot of revenue for the government to give up on a plan that could failwhen concerns about debt and the deficit are mounting.

Bringing forward infrastructure spending

Spending on infrastructure is a good old fashioned way to get the economy moving. Officials in Downing Street are keen to use the delayed National Infrastructure Strategy, worth around £100 billion, as part of an economic stimulus with them hoping to get projects started as soon as possible. This is positive news for infrastructure supply chain investors, as well as for those with assets in the north of England and Midlands where much of the spending is expected to be targeted to shore up support in seats won by the Conservatives in December 2019.

While infrastructure spending can help the economy recover, to do so, it needs to happen soon. However, large projects that will do the most to stimulate the economy are the most difficult to start quickly, often taking years to get off the ground. The government is searching for projects that can be completed in 18 months, but even these smaller projects will struggle with the twin problems that there is a shortage of skills for many of the jobs the projects would create and that the government’s own planning rules are making it difficult to start projects quickly.

Cutting National Insurance Contributions (NICs)

To try to prevent an unemployment crisis, the government is considering a cut to employer’s NICs, or more radically implementing a temporary NIC holiday where employers don’t have to pay NICs on newly hired employees. After employees’ wages, employer’s NICs are the biggest cost to firms, reducing this cost would make it cheaper for firms to hire new employees and keep furloughed workers on the payroll.

A cut to employer’s NIC would be popular with employers and investors alike and has been endorsed by the former Chancellor Sajid Javid. However, if the combination of social distancing requirements and Covid-19 induced changes to consumer behaviour means that millions of jobs don’t exist anymore, a cut to employer’s NICs will do little to stem the tide of unemployment. The UK’s labour market is flexible enough to reallocate workers in these non-sustainable jobs to new roles, but this will not happen quickly. Also, while uncertainty over how long we have to live with the virus remains, businesses will not know which jobs will be viable over the long-term.

Cutting Stamp Duty

An often criticised tax, Stamp Duty has been claimed to create friction in the housing market, preventing growing families move home and stopping older people from downsizing. By cutting Stamp Duty, Rishi Sunak would be able to offer a significant boost to the home moving sector which would in turn increase spending in other areas, as well as create a more flexible labour market.

Think tanks such as the Centre for Policy Studies and Onward have recently called for reforms to Stamp Duty, with the latter suggesting Stamp Duty should be abolished for all homes worth less than £500,000. Choosing to limit the Stamp Duty cut to homes valued at less than £500,000 would make sure that the benefit of the cut is aimed away from the most well off individuals and would limit losses to the Treasury. Such a cut would benefit investors involved in the housing market, as well as those with assets in the home improvement and retail sectors, given that home moving is a stimulus to demand in these sectors.

There are no easy answers for the Chancellor, but there are certainly changes that could be made to help individual parts of the economy. While some of the options available will be costly, the government is likely to take the risk given the current exceptional circumstances. The unfortunate reality for the government is that the one thing that would allow the economy to grow unhindered is for the virus to be completely contained, but there is little sign of that occurring any time soon.



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Under the microscope: M&A faces new post-Covid world

As most European countries appear to have passed through the peak of the coronavirus pandemic, governments have turned their attention to how to bring the economy back to life. It is becoming clear across all countries affected by the virus that one of the consequences of lockdown will be a wave of businesses entering administration or facing a fundamental restructuring of their operations.

Governments, ranging from populists in Poland and India to fiscal conservatives in Germany, are concerned that the number of businesses looking for new ownership will lead to foreign buyers acquiring assets in bulk. To tackle this, they have turned to protectionist policies to keep prospective buyers out.

Protectionist tendencies were becoming more common before the coronavirus pandemic

The economic policy response to coronavirus is likely to continue to vary significantly across the Eurozone and beyond. However, one emerging trend is the number of countries, including the UK, that are introducing legislation designed to increase scrutiny of M&A transactions on national security grounds. Primarily designed to exclude foreign buyers from purchasing assets of national importance while prices are lowered by the coronavirus pandemic, the wider effects of these laws may make cross border M&A a more complex task for all investors in the future.

The willingness of governments to intervene in M&A has been increasing in recent years. Australia and the United States have been particularly interventionist and have been hawkish on the issue of Chinese investment, both banning Huawei from helping build 5G networks. Although the UK to date has not blocked an M&A transaction on national security grounds, in recent years the Competition and Markets Authority (CMA) and UK government has scrutinised an increasing number of transactions on national security grounds involving various kinds of acquirer, including financial investors. Acquisitions of Cobham, Northern Aerospace and satellite operator Inmarsat have all been investigated by the CMA and the transactions approved. In all instances, the acquirer offered several legally binding assurances to the government before the deal was approved.

The government is taking rapid action to protect strategic industries

Here in the UK, Boris Johnson, Rishi Sunak, Alok Sharma and Dominic Raab are currently developing new legislation that would make it easier for the government to intervene in M&A transactions on national security grounds. In the short term, amendments will be put forward to protect UK assets during the coronavirus pandemic, however, a more detailed plan for a new, more interventionist takeover system is being drawn up and will be presented to Parliament before Summer recess.

Two new proposals already tabled in Parliament will make it tougher for foreign buyers to acquire any assets related to the nation’s healthcare self-sufficiency and, separately, artificial intelligence and other tech. One amendment would drop the £1 million revenue threshold currently in place for screening takeover targets in AI and other areas that pertain to national security. This would allow the government to intervene in the takeover of loss-making start-ups developing medicines or technology of national interest. The other amendment will widen the government definition of sectors critical to national security to include the food and drink sector for the first time.

Crucially, neither of these amendments specify what kinds of investors will be targeted under the new legislation. While concern may rest primarily with state-owned buyers, investors should be mindful that the CMA has instigated action against several US funds in recent years, including in the sale of Cobham and Inmarsat indicating the importance of the asset will take precedence over the nationality of the buyers.

A new long term takeover regime will change how investors should approach UK assets

The new takeover regime being devised would require UK businesses to declare when a foreign company tries to buy more than 25% of its shares, assets or intellectual property. The plans are significantly more stringent than those drawn up under a similar scheme considered by Theresa May’s government, under which companies would have been expected to notify the government of takeovers voluntarily.

Reporting will only be required for businesses where a takeover would pose a risk that it could give a foreign company or hostile state the power to undermine Britain’s national security through disruption, espionage, or by using “inappropriate leverage.” The significance of this legislation will be determined by how this risk is defined. Legislation planned under Theresa May used an incredibly broad definition, which, if replicated, would allow any secretary of state to intervene in any M&A transaction if they were concerned about the security implication.

The sectors most likely to be affected are civil nuclear, communications, defence, energy and transport, however compulsory reporting of transactions would likely have the effect of slowing the pace of deals across all sectors. Investors, whether they deal with sensitive assets or not, are likely to have to get used to greater government interest in their activities, an increased reporting burden, and potentially greater media scrutiny of their activities as the government makes its investigations public.

Change in the EU brings challenges and renewed opportunity

Countries across Europe are also acting. Margrethe Vestager, EU Competition Commissioner and Executive Vice-President of the European Commission, has encouraged EU states to take action to prevent foreign takeovers. Describing the protection of EU businesses from takeovers as a “top priority,” Vestager has effectively encouraged states to act against any takeovers deemed to be a cause for concern.  While this fear relates primarily to Chinese investors amid concerns about intellectual property and national security, the political unwillingness to single out the Chinese for special restrictions could risk creating significant collateral damage. Plans put forward by the Commission would exclude all state owned buyers, potentially eliminating some of the competition for assets created by the increasing activity of Middle Eastern and Asian funds in Europe.

Poland’s populist government is among those planning changes. Legislation is currently being drawn up to allow regulators to block non-EU companies from taking stakes of more than 10% in businesses deemed to be providing critical infrastructure, goods or services for two years. This more stringent block on foreign investment is in part due to the comparative affordability and availability of Polish businesses. 30 years on from the end of communism in Poland, those who have built successful businesses are beginning to reach retirement age, while a drop in the value of the zloty has also pushed prices lower for foreign buyers.

The issue for investors comes back to Brexit. Much of the proposed legislation would impose additional restrictions on all non-EU countries. Proposals, such as those put forward by the Dutch government, would ensure governments could halt companies from buying EU competitors at inflated prices or undercutting them with artificially low selling prices. The Spanish government, meanwhile, is proposing that non-EEA investments larger than 10% in key domestic assets in the “strategic industries” such as infrastructure, technology and media be authorised by the Spanish government. The European Commission would also have the authority to demand greater transparency in foreign companies’ accounts.

These restrictions will soon apply to the UK, with the true impact likely to be determined by the extent to which the UK chooses to diverge from EU law relating to financial services. It may be possible to negotiate the UK’s exclusion from these additional barriers to investment if the UK and EU agree to a close trading relationship for the financial services sector. This would be unlikely to be completed by the time the UK leaves the transition period on 31 December and negotiations around the full financial services future relationship are likely to take years to complete due to their complexity.

Much of the legislation remains in draft phase across the EU and the UK as politicians continue to prioritise the immediate economic and health challenges and much will depend on whether governments can pursue such ambitious regulatory change in the coming months. If these laws do make it onto statute books, investors willing to deal with the additional bureaucratic burden may find greater choice and potentially lower competition for assets in areas of “national interest.” Regardless of sector, as the size of government increases and its post-Covid appetite for intervention grows, investors will need to adapt to greater government engagement in the future.

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Counting the cost: what coronavirus means for care homes

As the UK continues to struggle with the effects of the coronavirus pandemic, the frailty of our social care system has been confirmed, weakened by decades of underfunding and delayed reform. The government is now beginning to lay the groundwork of finding solutions to the complex problems the sector faces. However, the scale of the challenge involved – and the daunting political risks – mean the sector will have a long way to go before it can benefit from the pressure of the media spotlight government is under.

The social care sector is often seen as the poor relation of the NHS in the UK, fragmented and without the long-term funding solution pledged by successive governments.  The social care green paper promised by then Prime Minister Theresa May in 2017 never materialised, and her successor Boris Johnson has yet to set out his vision for dealing with the system, beyond saying that he would be seeking a ‘cross party consensus’ on the way forward.  There has been little evidence of this cross party approach in practice, but No10 and the Department for Health and Social Care are now assessing whether a social care tax for over-40s is a viable option.

With the issues the sector has grappled with for more than a decade becoming more pressing with every passing day, the government will struggle to put off reform for much longer.

Legacy issues have been compounded by the covid crisis

Even before the coronavirus pandemic, the UK’s social care sector was under serious strain. A June 2019 survey published by The Association of Directors of Adult Social Services (ADASS) found that in the previous six months, 80 councils had experienced a home care provider failing and 38 experienced providers handing back contracts.

Despite rising demand for care across the UK, investors drawn to the sector are struggling to find ways to translate demand into a strong business model. Now, rising PPE and staff costs, and falling resident numbers mean that care homes are under even greater financial strain. The government has allocated £3.2 billion to councils in the past two months to help them respond to coronavirus outbreaks, but to date, the additional funding – in the form of an increase in the fees they pay care homes – has failed to reach some providers.  An example of this was in Sheffield, where on 19 May care homes wrote to the council to ask for additional support, arguing the forms they were required to fill in to access the funding were overly complex and made the system too slow.

The government is continuing to seek solutions to the additional pressures coronavirus has put on the social care system. On 8 June Health Secretary Matt Hancock announced the formation of a new coronavirus social care support taskforce led by David Pearson. The task force is responsible for the delivery of practical advice and support for the care sector, but no additional funding is available through initiatives it manages.

Many privately owned care businesses are also holding high levels of debt.  Accounts for HC-One, Four Seasons Health Care, Barchester Healthcare, and Care UK, which combined run about 900 care homes and look after 55,000 residents, show they are paying an overall average rate of almost 12% interest on total debts of £2.2 billion, according to Opus Restructuring. To pay debts as well as meet staffing and care costs, as well as the increasing cost of PPE, an estimated occupancy of at least 80% is required – a figure increasingly difficult to maintain as the pandemic continues. The Knight Frank care home index found an average occupancy rate of 88.9% in 2019, but the sector has reported a decline in occupancy of between 4%-8% in April 2020, potentially putting remaining residents at risk of their care provider becoming insolvent.

Issues with quality, while improving, also remain more common in for-profit care homes. 84% of care homes run by local authorities were rated good or outstanding in 2018-19, compared with 77% of for-profit homes, according to LaingBuisson analysis in August 2019. This could be in part a funding issue. Analysis by Care UK has found evidence of local authorities providing preferential funding to their own care homes, at the expense of for-profit providers. One council, for example, was found to be paying £650 per person per week for its own care home versus less than £500 to an independent provider. LaingBuisson estimates costs for a well run home will be between £623 to £726 a week per person, meaning some for-profit providers will be struggling to make fees cover the cost of care.

Coronavirus has once again brought the issue of quality of provision in care homes back to the top of the political agenda. After the media drew attention to the 10 coronavirus related deaths in a single HC-One owned care home on Skye in May 2020, the regulator carried out an inspection and raised “serious and significant concerns” about its management.

The whole sector should expect more scrutiny of the services it is providing, from the media and parliament, particularly as the coronavirus inquiries begin. Care homes, particularly larger chains with complex management structures, will see enhanced, sustained scrutiny as a result of the coronavirus crisis, with politicians and the media alike keen to assess how businesses have managed the crisis, and where mistakes were made. Care homes, with their tragic death toll and specific vulnerability to the disease, will be an area of focus as the government looks to learn lessons from the pandemic.

A significant issue for the sector, and one that has been repeatedly highlighted by politicians and the media during the coronavirus pandemic, is the comparatively low pay of care workers. All supermarkets now offer higher minimum hourly pay than the average social care worker hourly rate. Unlike other sectors, opportunities for promotion and pay increases are often hard to find, leading to an average annual staff turnover of over 30%. Although care workers will benefit from increases to the National Living Wage pledged by the government, if other sectors continue to go above and beyond the minimum standard, the sector will continue to struggle to find enough staff. Care England, the representative body for independent care providers, has warned that without an increase in the fees local authorities pay care providers, increases to the Living Wage will be unsustainable for the sector. Without an increase in funding levels, the government risks further destabilising the sector through the NLW increase, but without higher pay, the sector is unlikely to find the long term staffing solution it needs. Finding a solution that works for the sector, its employees and the government will be key to any long term settlement.

What is the future of the sector?

Social care will certainly face some difficult days ahead, and business failures are likely. However, the coronavirus crisis could be the wakeup call the government needs to enact real change in the sector and to give it the stability it needs. Media scrutiny has never been higher, and the oncoming onslaught of parliamentary and independent inquiries into the response to coronavirus will inevitably lead to focus on how the government should rectify the problems in the sector. A continuation of the status quo is likely to become impossible as pressure grows.

Large care providers, particularly those owned by private equity investors, will face more pressure than ever to demonstrate their value to the sector and the quality of their services. This will require a concerted communications effort with government, regulators and, in some cases, the media. If the sector is to ask the government for additional support, it will need to demonstrate why additional funding is necessary and to assure the government that businesses receiving additional funds are responsible employers and care providers. The affairs of care providers, like the wages they pay to staff, the amount of tax they pay, and the fee structure they use for residents, will soon be under much closer scrutiny.

This will be a particular challenge for private equity owned businesses, where perceptions of highly paid executives using profits to fund bonuses, rather than improvements in care, continue to persist. Without addressing the perceptions of policymakers head on, for-profit care homes will struggle to make an impact on government policy and will find offers of financial support thin on the ground. P

The government’s response to Covid-19 has also demonstrated that Private equity as an industry will itself face this challenge. Government reticence to provide financial support to private equity backed businesses during the crisis has laid bare how reputational challenges translate into real world business problems. The private equity industry will have to tackle negative perceptions of the sector head on to ensure the government understands its needs, and the needs of its portfolio companies.

Investors willing to look at the longer-term picture for the sector could be rewarded with a new, more stable financial settlement, if the government is prepared to make hard choices on how it will be paid for.

Polls show there is public consensus on how to pay for social care – a system that is free at the point of use, funded by general taxation in a way that is similar to the NHS. However, the additional funding required for social care is substantial, and very many people will have less disposable income as a result of the lockdown and likely economic downturn. How government chooses to balance this trade-off will say a lot about its longer-term priorities. Recent reports indicate that the government is considering taking advantage of the public polling to introduce a new system of taxation for over 40s to help pay for elderly care.

Before the coronavirus pandemic, the government was revisiting the recommendations of the 2011 Commission on Funding of Care and Support and held talks with the Commission Chair Sir Andrew Dilnot. The main principles of the Commission’s recommendations were a more generous means test for government funding, combined with a lifetime cap on care costs. Versions of Dilnot’s model were proposed and subsequently dropped by both David Cameron and Theresa May, who both saw the electoral pitfalls of tackling the social care crisis head-on.

Now, the government appears to have advanced its thinking in response to the clear urgent need for reform displayed during the pandemic. Health Secretary Matt Hancock in particular advocates taking inspiration from countries thought to have successfully found solutions to funding social care, while encouraging the development of a well functioning competitive market for providers.

Two sources of inspiration are Germany and Japan, where the ageing population led the two countries to reform their respective elderly care systems far earlier than in the UK. In Germany, reforms introduced in 1995 introduced a social care insurance system, with employees paying around 3% of their income annually and the amount being matched by their employers. This insurance system covers the cost of a minimum standard of care for individuals regardless of their age and is not intended to cover the full cost of an individuals needs. For providers, the system combines the nationally set benefits with local commissioning which combines financial certainty for providers with local flexibility, allowing them to negotiate with local authorities for funding that reflects the needs of the area.

The system in Japan, introduced in 2000, is relatively similar to that of Germany. Long term care insurance provides universal care to those over 65, covering an unusually wide care remit that includes wellness and prevention. Insurance payments are compulsory for over 40s, with the rest of social care funding being collected from general taxation. In addition to paying premiums, service users must pay a co-payment when accessing services, although those on very low incomes are exempt. Most people pay 10% of their care costs, although this rises to 30% for those on high incomes. The care provider market is an incredibly competitive one, primarily consisting of small care providers and which are a mix of for-profit and not-for profit companies, social enterprises and charities.

Both of these systems have significant attractions for the UK government and show that creating a care system that satisfies the population while limiting government expenditure is possible. Issues with both systems still remain. The cost of care, particularly in Germany, has risen in recent years, increasing the amount of care people must self-fund and both Germany and Japan suffer from the same workforce shortage issues faced in the UK. However, with the UK’s social care system untenable in its current form, social care providers can look to the examples of both Germany and Japan and see a way forward that includes high quality of care and financial stability for the market.

The road ahead for social care is certainly difficult and there are no easy choices. Yet the sector needs change, and pressure will continue to grow for meaningful sector reform. Johnson has promised this reform, but with everything else the government has to deal with at the moment, we may be waiting a while longer for the difficult decisions to be made.

This article was originally posted on 9 June and amended on 28 July. 

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Navigating choppy waters

This article was originally published by Real Deals, please find the original here.

The impact of the global Covid-19 lockdown on UK deal flow has been stark and swift. Processes that haven’t been cancelled have been put on hold, with investors and advisors alike stopped in their tracks by current events.

The unprecedented nature of the crisis, its impact on pre-Covid valuations and, crucially, the lack of visibility beyond the immediate future – including the potential for future lockdown periods – makes determining the future profitability of any business near impossible. Until the economy starts to recover and we have more clarity on which sectors have been particularly hard hit by lockdown, that lack of visibility will continue.

Changing roles

Given the drop-off in M&A, the role of due diligence providers has changed. As political risk specialists, WA has been able to swiftly pivot away from transaction-specific work to support investors, and their management teams, in other ways. Helping them understand and navigate the rapidly moving political landscape has been key, as has supporting communications that have needed to be had with staff, customers and other stakeholders.

The savviest investors have made available a raft of specialists to their management teams to mitigate the worst of the crisis and to get them in the strongest position possible for when the recovery begins. Policy, government relations and corporate communications specialists have been key amongst these.

Political shifts

Politics is moving at the most rapid pace we’ve ever seen. Policy making has become a public spectacle, with all the missteps, U-turns and teething problems being played out in real-time. Policies that would usually take months of careful planning and consultation are being rushed out in a matter of days, set out in broad strokes, with detail being back-filled.

Government is watching the business response to any measures announced like a hawk and has already demonstrated it will tweak its position if a robust case is put forward on why it should do so. The burgeoning number of business support schemes to cover different parts of the economy, as well as the extension to key policies like the Job Retention Scheme, is a clear illustration that government is reacting to business sentiment, and needs input from experts to make sure its support is both sufficient and appropriately targeted.

Lobbying government, on the face of it, looks easier than ever. Not only are policymakers arguably more alive and responsive to external events than ever before, but they are actively
seeking input from business. But a word of caution – influencing policy at a time of national crisis is only possible if it is done so sensitively with an acute awareness of the government’s wider set of priorities. The case needs to be made to the right people, at the right time, and be reinforced by advocates and influencers that have a say in the decision-making process.

The five ministerially-led ‘taskforces’ are one recent example. They have been designed to advise on the development of guidelines to underpin the government’s back-to-work ‘roadmap’ and will be seeking input from sector specialists to make sure the voice of business is heard. The taskforces have already been inundated with communications so making your business stand out will be crucial.

WA has already supported several companies navigating business-critical issues to make their case to government, positioning them as part of the solution to getting the UK economy back on its feet.

From putting together an evidencebased campaign to get the housing market moving again, to demonstrating the valuable role of cycling as an alternative to public transport, we’ve helped businesses engage with government in a way that helps them achieve both commercial and policy objectives at a very challenging time. 

‘New normal’

Once the market returns, it’s likely to be busier than ever on the M&A front. Demand for businesses that have demonstrated their resilience are likely to do particularly well, and competition for these businesses will be fierce, more so if other deals slated for the latter part of the year have fallen away.

Political due diligence will be more important than ever. Covid-19 has shifted the political sands and some things that we may have taken for granted – the government’s appetite for political intervention, the size and reach of the state, tolerance for poor corporate behaviour – we will no longer be able to bank on.

Government has already promised a “rapid re-engineering” of government’s structures and institutions to deal with this historic emergency and to “build new long-term foundations”. This is the ‘new normal’ we’ve been hearing so much about.

What is also clear is that once the dust has settled, there will be a corporate reckoning to sort those businesses deemed to have had a ‘good’ crisis from those seen to have performed poorly – either in how it has dealt with its employees, how it has communicated to customers, its approach to senior pay and dividends, and the asks it has made of government, financial or otherwise.

It is vital that businesses plan now for the aftermath and ensure they are preparing their case, planning their communication strategies and reaching out to potential advocates. Failure to meet political and public expectations could result in lasting reputational damage and potential excessive intervention by government. There are currently 17 Select Committee inquiries already underway relating to the coronavirus response of government, four of which are directly scrutinising the response of businesses.

As Winston Churchill once famously said, this is “perhaps the end of the beginning,” but we are a long way from this crisis being over and businesses that move now still have time to get ahead of the game.


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Government’s Covid-19 response: What it means for private equity

The government’s response so far to the Covid-19 pandemic provides for a mixed report card.

Disasters have been averted in the NHS, but death numbers are among the highest in Europe and coronavirus is having a devastating impact on care homes. Questions about the timing of lockdown and the government’s testing infrastructure also remain. The government’s business support measures have been more successful. The furloughing scheme has undoubtedly saved hundreds of thousands, if not millions, of people from unemployment and credit is finally making its way to businesses who need it via the Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme (CBILS).

Private equity firms and their portfolio companies have not been at the front of the queue to receive government financial support, nor have they been at the forefront of the government’s mind throughout the policy development process. The furloughing scheme has allowed portfolio companies to keep staff on the payroll, while the government subsidises their wages, and the news the scheme will continue until October provides certainty to both workers and management teams for the next few months at least.

CBILS, when it was announced in March, gave the impression that it could provide a vital line of credit to support the liquidity of many private equity-backed portfolio companies. CBILS allowed firms with a turnover of less than £45 million to borrow up to £5 million, with 80% of the loan backed by the government.

However, many portfolio companies were ineligible for the loans as turnover was originally calculated on a group basis, taking into account the portfolio as a whole. This rule was later relaxed to allow portfolio companies to apply as separate entities for the government-backed loans, alongside the introduction of the Coronavirus Large Business Interruption Scheme (CLBILS) that provided credit to firms with turnover over £45 million. CLBILS was created after it was pointed out to government that many firms were too large for CBILS but were not of investment-grade so could not access the Bank of England’s Covid Corporate Financing Facility (CCFF).

Just when private equity firms thought it was possible to dip their toes into this new pool of credit, another issue raised its head that has proved to be a significant barrier to portfolio assets accessing the government-backed loan schemes.

Under EU state aid rules, firms that had accumulated losses greater than half their subscribed share capital as at 31 December 2019 are not eligible for government support as they are deemed to be a ‘business in difficulty.’ Due to the leveraged structure of the vast majority of private equity portfolio companies, this rule has made them unable to access CBILS and CLBILS.

Both the British Private Equity and Venture Capital Assication (BVCA) and the Confederation of British Industry (CBI) are currently lobbying the EU Commission to change the rules, but so far the Commission has held fast.

The saga of how the government’s various support measures have arguably fallen short in supporting PE-backed companies illustrates two important facts about government.

The first is that the old adage about not wanting to see how the sausage is made still holds true. The government has had to conduct policy development that would normally take years in a matter of months, with every mistake or problem that would have been caught along the way being made in full view. Fortunately, industry groups like the BVCA, and expert advisers supporting individual investors have been on hand to support the government and ensure the measures have been refined enough to help the majority of businesses.

The second is that while government has been willing to make some concessions to private equity, the sector is clearly nowhere near the top of the government’s agenda. This partly comes down to a lack of understanding of how the private equity model works, for which the industry itself must take some responsibility. If policymakers buy in to many of the enduring myths about the sector –  that UK private equity firms are sitting on huge amounts of cash that could be deployed to support their portfolio companies – for example, there is little incentive to go to any special lengths to provide them state-backed financial support

The post-coronavirus recovery will offer private equity firms the ideal opportunity to rectify this problem and ensure a more prominent position in the government’s thinking. By demonstrating how private equity firms bring expertise, innovation and growth to businesses in all sectors across the UK, private equity can make its case that it is a force for good.

Government will be looking for every opportunity to promote growth and investment, and private equity firms will be in a strong position to contribute to this.


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5 ways communications will change after Covid-19

Covid-19 has enforced a huge impact on all our lives, professionally and personally, and has caused a huge shift in the way we communicate with each other.

The Microsoft CEO, Satya Nadella, summarised the change by saying that “We’ve seen two years’ worth of digital transformation in two months”. Looking beyond this incredible rapid change to the channels we are using to communicate, there has also been a noticeable shift in how businesses are talking to their staff, customers, investors and broader stakeholder community.

But how much of that has been a necessary response to the crisis, and what will endure as lockdown measures are eased?

We take a deeper dive into five things that have changed for good in the communications landscape:


1) How businesses communicate

The nature of the Covid-19 crisis has forced businesses and leaders to communicate frequently and openly to employees, customers, shareholders and suppliers.

We have quite literally seen into each other’s lives through a constant stream of video calling, a previously undreamt-of insight into our colleague’s personal lives.

This transparency has forced leaders to embrace authenticity, be more empathetic and available than they would have been ordinarily, which has been valued by employees.

Remote working is likely to endure for the foreseeable future, but even once things return to a more normal footing businesses and leaders would do well to maintain regular and authentic communications – their stakeholders will now be expecting it.

As the situation evolves, businesses are going to need to think strategically about how they manage their communications across a variety of scenarios and channels depending on what the recovery looks like.

Planning for this should be a top priority.


2) The value of being seen as a responsible business

Consumers, regulators, MPs, government, employees (both current and future) and the media have all been watching how businesses have behaved during this crisis. Select Committees are already holding inquiries into how some industries have behaved.

Business who have taken financial support from the government whilst paying out dividends or bonuses will be questioned; high executive pay will look even more unpalatable in an era with potentially record levels of unemployment.

This increased scrutiny will only increase the importance of corporate responsibility, or ESG (environmental, social and governance) as it is called in the investment world.

Businesses will need to be able to demonstrate their impact above and beyond profit – their tax strategy, social impact, climate strategy, supply chains, employment practices will all be under the microscope from a variety of stakeholders.

Companies that don’t have a positive story to tell on responsibility will need to develop one. And organisations who want government to listen will need to be able to show they have a positive, helpful and responsible impact on society.


3) Resilience, risk and crisis preparedness

Every organisation’s business continuity plans have been tested over the past few weeks and going forward more organisations will take risk planning seriously.

The new reality will demand it – every business will need to make judgement calls about acceptable levels of risk for their employees to return to work and how they operate over the next 18 months.

Reputational risks will be rife in the ‘new normal’, businesses will need make sure they are ready. Organisations without crisis communications plans and risk registers, regularly updated and reviewed as standard, will also put these in place so they are prepared for the next time.

Stakeholder lists need to be reviewed and updated, channel strategies and messaging refreshed, and tone of voice carefully adjusted.

Leaders should think about ensuring their media training is up to scratch, their knowledge of the messaging locked down.

Finally, businesses should make sure they appoint dedicated issues and crises team with clear roles and responsibilities assigned.

Some will already have all of this in place and will simply need to review and update, others will be starting from scratch.

In the ‘new normal’ not being prepared is not an option.


4) Government will be looking for solutions

The financial impact of Covid-19 for the public purse will be felt for years to come – bailout measures plus significant reductions to expected tax income will threaten the Government’s ambitious spending plans unveiled in the Budget just a few short weeks ago.

The government will be looking for creative ways to plug that shortfall, but where to target tax rises will be highly controversial.

To make matters worse, don’t forget this is a newly elected Government, elected by a swathe of new Conservative voters in traditional Labour seats who’s battle cry has been to “level up” Britain.

However, what is a headache for the Government is an opportunity for business.

Creative, bold and eye-catching policies, assuming they have minimal or even positive revenue implications, will be welcomed.

Anything that can be seen to contribute to the recovery from Covid-19 or creates jobs will be listened to.

It seems a way off now, but with an election in 2024 businesses should think about how they can help the government find a legacy that can they can take to the ballot box.


5) The return of the experts

During the 2016 Referendum, Michael Gove famously told Sky News that “people in this country have had enough of experts” and for much of the following years that appeared to have been prophetic.

Emotion, rather than evidence, has been in the ascendancy, with how they voted in the divisive 2016 ballot seen as the decisive motivating factor behind decision making.

Covid-19 has turned all of that on its head, the experts are back.

The Government’s entire communications message has been that our response is “led by scientists”, even to the extent of giving unprecedented airtime to the Chief Medical and Chief Scientific Officers, roles few in the general public would previously have been aware of.

In the post-Covid environment businesses will have an opportunity to offer their expertise to government and position themselves as authorities in areas where they have specialisms. We have seen how government is keen to work with businesses during the crisis through programmes like the Ventilator Challenge, and that mindset will continue through the recovery.

Where organisations can provide evidence bases, insight or add to the public discourse they should seize those opportunities, people will be listening.



As we move into Phase 2 of the Covid-19 crisis, there will be continued uncertainty to navigate we tentatively ease elements of the lockdown.

Some businesses will be aching to revert to normality as soon as possible, but things will not go back to the status quo – markets and attitudes will have evolved in response to the pandemic, and not all businesses will respond to their new environment.

As we discover what the ‘new normal’ looks like, those that succeed will have learnt some valuable lessons from the past few weeks, not just about video calling and remote working, but fundamental shifts in how they can and should approach communications.

Those that heed those lessons can flourish, for those that don’t there may be more challenges to come.



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New Year, new politics: dealmaking after the election

Politics in 2020 is shaping up to be a very different beast than in 2019. But what does it mean for investors and dealmaking?

Yes, Brexit is still the talk of Westminster, but we now have a government with a clear agenda, and crucially, a mandate big enough to deliver it.

Johnson’s election campaign strategy was clear – a laser like focus on the need to Get Brexit Done, wrapped in a wider narrative of hope, optimism and aspiration. And it worked. Johnson’s government now has a majority bigger than any other Conservative administration since 1987 and the Labour Party is potentially looking at another decade in the political wilderness.

The Prime Minister’s election campaign was also underpinned by a number of retail policies designed to reach out beyond the Conservative’s traditional voter base – rollout of full fibre and gigabit-capable broadband, further rises in the National Living Wage, 20,000 more police and tougher sentencing of criminals, and targeted support for the British high street.

Johnson knows that many traditional Labour voters ‘lent’ him their votes in 2019 and he will be keen to consolidate their support ahead of 2024.

Brexit upended traditional party loyalties and the strategy of the Conservative Party election machine (led by a reassembled Vote Leave contingent) of pushing hard into former Labour strongholds in the Midlands and the North of England saw a swathe of constituencies go blue.

Johnson will be acutely aware that the only way of shoring up new lower middle-class and blue-collar workers will be by making sure there are tangible improvements in their lives – more money in their pockets, safer communities and more accessible public services.

The market response to the Conservative majority was clear – the FTSE 250 saw its biggest jump in a decade as investors piled into UK stocks and Sterling rose sharply against the Dollar and jumped to a three-and-a-half-year high against the Euro.

Shares in politically sensitive markets like water, which faced the threat of nationalisation under a Labour government, saw big gains and banks exposed to the UK economy witnessed their share prices rise sharply once the election result became clear.

So, what does the Johnson government mean for UK investors and dealmaking?

1.    Johnson is Getting. Brexit. Done. 

The UK will leave the EU on 31 January. We’ll then enter an 11-month transition period during which the UK and the EU will try to thrash out a free trade deal. If a trade deal is successfully agreed, the UK and EU will start trading on those terms immediately after the transition period ends.

If not, the UK faces the prospect of having to trade with no agreement in force, or to agree to a number of stop-gap measures with the EU.

While leaving on WTO terms now appears relatively unlikely, the next few months of trade negotiations are likely to be fraught, and it may be that the UK leaves the EU with a relatively bare-bones ‘zero-tariffs, zero-quotas’ deal on goods in place. Investors in cross-border or export-dependent businesses would do well to watch how this develops and adjust their dealmaking strategy accordingly.

2.    The policy and regulatory horizons are clearer. 

From a domestic policy perspective, we finally have what investors crave: certainty.

The Conservatives have been clear on their domestic policy agenda and on the modernised ‘One Nation’ rationale that underpins their approach to government. With Johnson gearing up for a ten-year stint in No.10, we can expect departments across Whitehall to start gearing up for a period of intense policy-making.

Whilst this may mean change in the short-term, a lengthy period of implementation will likely follow, taking some of the guesswork out of business planning.

3.    Business is no longer a dirty word. 

Contrary to Johnson’s anti business stance back in June, the Conservative Party manifesto also contains a lot that will be comforting to British business. Frequent references to a ‘dynamic free market economy’ set the scene for an unashamedly pro-business agenda and should be good for dealmaking.

Notably, the Conservative manifesto makes repeated reference to the ‘symmetry’ at the heart of the UK economy, and the importance of maintaining this balance through the support of British business: “We are the only party that understands the symmetry at the heart of the UK economy. That the only way to fund world-class public services and outstanding infrastructure is to encourage the millions of British businesses that create the wealth of the nation – especially small businesses, family firms and the self-employed.”

A revived recognition of the role of private sector business is already coming from coming from No.10 – promises to ensure regulation is ‘sensible and proportionate,’ a continuation of the ‘spectacularly successful’ Enterprise Investment Schemes, increases in R&D tax credits and a reduction in business rates all signal Johnson’s intentions.

More powers to the Competition and Markets authority to tackle rip-offs and bad practices will be the government’s nod towards making sure consumers aren’t forgotten.

4.    The age of austerity is over, at least in the North. 

Ahead of the anticipated Budget in the Spring, the Treasury is reportedly rewriting the way the government calculates value for money in order to divert additional funds away from London and the South east and towards the North and Midlands.

Traditional calculations (on a Gross Value Add basis) have disproportionately focused spending on transport, infrastructure and business development projects in areas with the highest population and business density. Under the new rules, government investment will be directed towards reducing inequality rather than predicated on promoting overall economic growth.

Given these changes, we can expect major productivity-enhancing projects outside London to be high on the government’s list for early spending commitments.

However, Johnson’s political honeymoon won’t last long, and he’ll have several critical issues that he’ll need to tackle once he’s back behind his desk in January to demonstrate his government is delivering on its promises. Creating a sustainable social care system, addressing an increasingly complex housing crisis, tackling historically low productivity rates and reversing the public’s disillusionment with the political establishment will be no mean feat, nor are there likely to be any quick fixes.

But Boris has spent most of his adult life preparing for this and will want to make sure that his government and eventual legacy is not solely Brexit-shaped – he wants to deliver lasting political change based on an optimistic, aspirational and enterprising new Britain.

2020 will be a year when we see just what Johnson is made of.


This article was first published in the January 2020 edition of RealDeals


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A long time in politics – 20 years of political due diligence

This article appears in the current 20th anniversary edition of Real Deals.

Cast your mind back to 1999. Tracey Emin’s My Bed was shortlisted for the Turner Prize, Manchester United won the treble, and the Millennium Dome was opened (to mixed reviews) as the cornerstone of the UK’s millennium celebrations.

Politically, it seemed like a simpler time. Tony Blair’s New Labour was still riding high in the polls, having won an historic landslide majority of 179 seats two years previously on a platform of progressive social reforms.

Two party, centrist politics was the order of the day, with the Labour Party and Conservatives looking for ways to capture and hold on to the centre ground. Labour had its ‘Third Way’, founded on establishing a modernised social democracy, passionate in its commitment to promoting social justice. The Conservatives, for their part, were trying to reconcile historic Thatcherite principles with the demands of a more socially liberal age. This process would reach its peak with the one-nation principles of social obligation that came to characterize the Cameron years in No.10.

The political philosophies of the end of the 20th century seem something of an anathema at the end of 2019, where political parties appear no longer interested in reaching out beyond their core support base and are retrenching to each represent a smaller and smaller subset of the electorate.

How did we get here? The answer is simple: if a week is a long time in politics, then 20 years is a millennium. Trying to find an answer to why did we get here is much more complex.

The journey from political stability to relative instability over the last 20 years has been punctuated by political risk flashpoints, all of which have driven us closer and closer to the ‘new normal’ in which we find ourselves.

The ongoing uncertainties around Brexit is the latest, and perhaps most obvious, example of a tidal wave of political change. But other events, domestically and globally, have also shifted us further and further away from where we once were, tilting the political system off its stable pre-millennium axis.  It has created an environment where political decision-making has become, on the face of it, less predictable, while presenting greater risks to those affected by them.

The UK economy still bears the scars of the 2008 financial crisis, with the subsequent recession bringing about austerity policies that are still being heavily felt across the public sector. Jeremy Corbyn’s Labour Party, promising a politics ‘for the many, not for the few,’ is perhaps the best example of an electorate tired with a political class mired in scandal and perceived to be ignoring the views of much of the population. The same can be said for UKIP, and latterly the Brexit Party.

Devolution of policymaking to Scotland, Wales, the EU and city regions has meant powers are more dispersed than ever. The creation of the first peace-time coalition in 150 years has changed the way we think about parliamentary democracy and accountability in the UK.

Demographic and behavioural changes, lifestyle factors and the rapid evolution and democratisation of technology have all played their part in creating the current disequilibrium in politics, having changed how we interact with the world, and how we engage with political processes and each other.

These changes, both individually and in concert, have brought us to a new political risk horizon, where decisions taken hour by hour, if not minute by minute, significantly shape the external environment.

It’s no longer enough for investors to tune into the ten o’clock news or the Today programme to understand policymaking and political priorities. In the past we have had the luxury of long periods of relative political stability where trends were easy to follow and predict; decisions made by policymakers were at least logical, even if we disagreed with them. 24-hour news, an omnipresent social media, and our permanent connectivity to emails and messaging apps mean that crises, comment, response and reactions now appear to happen at alarming speed, and political agendas seemingly evolve overnight.

20 years ago political due diligence didn’t exist in the way we know now. It has understandably become a key part of the M&A process as investors seek rationality in what appears to be a chaotic and disordered political reality.

That’s why political due diligence is now more important than ever. While there is method in the political madness, it’s harder to find and to follow. For investors to make informed decisions, based on real insight and understanding, they need specialist support.

WA Investor Services is at the forefront of providing that support, helping investors understand the risk and impact of political, policy and regulatory changes on their portfolios and potential assets. We keep them up to date with the fast-paced and ever-changing political world. We forecast and scenario plan for different outcomes and provide ongoing intelligence to track issues as they develop. In an era of rising political uncertainty in the UK, across Europe, and on the international stage our services help investors accurately price in risk.

The quality and salience of our advice is reflected in the sustained, extraordinary growth in demand for our services, and the regularity with which clients bring us on board time and time again as a key part of their transaction team.

If we know how we got here, and we’re some way to understanding why we got here, the next question must be what do we do now? The savviest investors will be those that quickly understand that restless, fractured politics is the new normal, and embrace the opportunities that those changes bring. Michael Gove was wrong – we need experts now more than ever, particularly when it comes to unpacking the nuances of politics in 2019 and beyond.

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WA named a finalist in 2019 Private Equity Awards

WA Investor Services have been shortlisted for the Specialist Adviser of the Year category in the 2019 Private Equity Awards.

The prestigious Private Equity Awards recognise the best practitioners and advisers in the industry, with a rigorous shortlisting process conducted by a panel of leading industry experts.

The Specialist Adviser of the Year award is bestowed upon advisers that offer unmatched insight and value for clients.

Investors look to WA Investor Services for in-depth and nuanced analysis of the political and regulatory risks impacting their decisions. We help our clients understand risks, forecast and scenario plan, and provide ongoing intelligence gathering to track issues.

Our work over the past 12 months has ranged across a diverse span of topics from the macro to the technical. From the implications of a potential Corbyn government and the different scenarios for immigration and trade post-Brexit; to energy contracts for difference, recycling policy, and the funding envelope for social and foster care.

As cross-border issues play an increasing role in determining risks, we have also expanded our international political due diligence offer. Last year we carried out policy risk analysis for deals covering markets as diverse as Eastern Europe, North America, Australia, Asia and the Middle East.

The awards ceremony will take place on 24 April at the London Hilton, Park Lane

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WA Investor Services shortlisted for Specialist Due Diligence Provider of the Year

We are delighted to announce WA Investor Services has been shortlisted as the Specialist Adviser of the Year in Unquote’s 2019 British Private Equity Awards.

The shortlist was selected by a panel of experts from the industry, to showcase innovation and excellence within UK private equity.

The winner will be determined by a public vote, considered alongside the judging panel’s decision. Voting is now open, you can support us by casting your vote here.

Investors look to WA Investor Services for in-depth and nuanced analysis of the political risks impacting their decisions. We help our clients understand risks, forecast and scenario plan, and provide ongoing intelligence gathering to track issues.

Our insight and ability to reach the heart of the commercial implications of the current political situation have proved invaluable for our clients and their investments. Over the last 12 months we have expanded our global and technical expertise, working on projects as diverse as the Polish legal framework and UK broadband regulation.

The awards ceremony, where the winners of the awards will be announced, will take place on 1 October 2019 at The Brewery, London, EC1Y 4SD


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