Brexit and geopolitical uncertainty are driving businesses towards divestments, EY report finds

 
William Turvill
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The UK voted to leave the European Union on 23 June 2016 (Source: Getty)

Around half of UK businesses are planning to make divestments within the next two years, according to a new survey released today.

Largely driven by external factors, 47 per cent of UK-based bosses surveyed by accountancy giant EY said they want to sell part of their business in the next 24 months.

The 2017 Global Corporate Divestment Study found disruptive factors are driving those business decisions, with 68 per cent of leaders pointing to Brexit, anti-trade regulations and monetary policy.

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Some 57 per cent cited macroeconomic volatility and 37 per cent pointed to risks or opportunities relating to the “digital age”.

Although UK sale plans are being driven by external factors, rather than strategic decision making, 56 per cent of bosses surveyed said they recognised that divestments create long-term value.

“Divestments triggered by macroeconomic and geopolitical uncertainty run the risk of delivering suboptimal outcomes as a result of time pressure,” said Charles Honnywill, EY’s divestment advisory services leader.

“Long-term strategy, rather than short-term external forces should drive UK companies’ decisions to buy, reshape or sell a business.”

Businesses based across Europe, the Middle East and Africa (EMEA) are being driven towards divestments by geopolitical concerns, EY said. Some 81 per cent pointed to regional political instability and 73 per cent to Brexit.

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Geopolitical uncertainty appears to be a far larger issue in EMEA, where 59 per cent of bosses said they were motivated by this factor, and the Americas, 30 per cent.

“In many cases, we are observing impulsive divestment decisions by companies feeling pressured by external factors to take quick action, often at the cost of realising maximum value,” Honnywill added.

“The impact of too much speed on sale price is significant, and should motivate companies to be strategic and measured by prioritizing value when navigating a sale process.”

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