UK venture investing sees limited Brexit impact
Venture capital investment in the UK rose slightly in the third quarter of the year, after a significant slide in Q2, according to the latest ‘Venture Pulse’ KPMG report.
UK venture capital-backed startups raised $834m in funding across 110 deals, both numbers reversing a series of quarterly declines since Q4 2015.
This suggests that while venture capital investors in the UK are concerned about Brexit, investments continue to be made and most UK investments and acquisitions already in the pipeline prior to Brexit have moved forward as planned.
While the decline in the British pound, post Brexit, may cause concern for some businesses with overseas suppliers, the devaluation may actually help to keep global venture capital investment interest in the country.
The full impact of Brexit on the UK economy and venture market is expected to become clearer over the next 2-3 years as the UK negotiates the terms of its exit from the EU, the KPMG report reads.
For startup companies that operate in a dynamic and rapidly changing environment, this means Brexit is not likely to be a top concern at the moment. However, a number of venture capital investors are beginning to evaluate Brexit impacts on a case-by-case basis, while others are looking for companies to address any implications from Brexit in their pitch decks.
In Europe, venture capital investment dropped to a 5-quarter low during Q3, despite the total number of venture capital deals increasing slightly quarter-over-quarter. Total funding came in at $2.3bn across 468 deals.
This decline in venture capital investment reflects investment trends and market uncertainties globally, including the pending increase in US interest rates, in addition to ongoing concerns regarding the long-term impact of Brexit.
“The long-term ramifications of Brexit haven’t been felt yet. Deals are still getting done, but many of these would have been in the pipeline before the referendum. The real impact will likely be felt heading into 2017, as the UK begins proceedings to disentangle itself from the European Union,” said Anna Scally, partner and head of Technology, Media and Telecommunications at KPMG in Ireland.