It will be at least two years before the 'Leave' vote is implemented, and the first effect to be felt is the pound sterling's sharp fall against the US dollar, and to a lesser extent, the euro. At the time of writing, sterling had devalued by nearly 10% to the dollar (though still fluctuating wildly). If this drop is permanent, a US- or European-sourced investment into a UK company would fund 10% more staff and equipment than a sterling investment. Moreover, a pound-priced licensing deal offered by a UK biotech now looks 10% more attractive to a US, European or Japanese big pharma partner. On the other hand, it also lowers the share price of stock-exchange-listed British companies from the point of view of foreign firms contemplating a hostile takeover.
“The fall in sterling could even help us,” says John Haurum, CEO of antibody discovery and development company F-star (Cambridge, UK). “Our investments and partnership revenues are euro- and dollar-denominated, so our business is not dependent on the sterling exchange rate.” Mark Thompson, a London-based partner at the private equity investment operation of Sidley Austin of Chicago, says “the exchange rate shift could make UK Inc. look very attractive from an investment point of view, particularly when the fundamentals of the businesses remain strong.” Though Thompson predicts a summer pause in UK biotech investment activity while investors explore the new landscape, he believes it will increase in the autumn, at least for dollar-zone investors. “With or without the EU, the UK has some very strong advantages that will continue to attract investment,” he claims.
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