Investments By Sovereign Wealth funds In The UK Hindered By Brexit


The United Kingdom has long been a favoured playground for sovereign wealth funds from across the globe to snap up banking stakes, posh department stores, and glitzy skyscrapers.

However, sources close to the funds disclose that the uncertainty over the tortuous exit of Britain from the European Union has put many new investments on hold.

According to PitchBook, a data and research firm revealed that in 2018, there was a sharp decline in investments by wealth funds via private equity, with deals dropping more than two-thirds from 2017 to $3.82 billion (£2.94 billion).

A London-based partner at Cleary Gottlieb, Tihir Sarkar, said: “A lot of funds are simply not pursuing deals (due to Brexit), while they wait for certainty.” Cleary Gottlieb counts various prominent sovereign funds as clients.

Brexit has currently been postponed until the 31st of October so the parliament can agree on terms. However, while that prevents the United Kingdom from crashing out without a transition period in place, it also prolongs the political and economic uncertainty.

At least the United Kingdom managed to draw a vote of confidence last February when the $1 trillion sovereign wealth fund of Norway, the biggest in the world, said that it planned to keep increasing its investments in the United Kingdom.

Majority of the large sovereign funds that were contacted did not respond or declined to provide comments regarding the matter, however, several said that their commitment to the United Kingdom remained unchanged while a couple acknowledged a pause in investments.

Spokesperson Brian Lott said that the Mubadala Investment of Abu Dhabi has its largest exposure to UK real estate and financial services. Its unit Masdar owns 20 percent of the London Array offshore wind farm. It has not yet made any changes to its investment strategy or portfolio in anticipation of Brexit.

He stated: “Our long-term strategy is opportunistic, so we will weigh the investment climate either way.”