Contributed By Winston & Strawn London LLP
The economic picture in 2019 remains complex.
In the UK, as the political process and negotiations surrounding the UK's proposed withdrawal from the European Union (so-called "Brexit") have dragged on, businesses have increased their preparedness for a hard Brexit, while adopting a wait-and-see approach to transactions and investment. One significant aspect of Brexit has been the continued weakness in sterling, which has prompted opportunist approaches to larger businesses in defensible sectors, but this has not spread to more mid-market targets.
Business associated with government funding received a boost with the spending review announced by the government in mid-2019. This has yet to be felt, but austerity-ending increases have been announced across large parts of government business.
Corporate lending (as opposed to deposit taking) remains an unregulated activity in the UK. There has been discussion of introducing regulation of non-bank lenders but, for the moment, regulators seem to be focused elsewhere.
More widely, international markets are still grappling to find alternative rate-setting mechanics following the announced withdrawal of the requirement that London banks contribute to LIBOR rate setting, which will affect how interest rates are fixed from 2021. While a lot of work has been done, no replacement with equivalent functionality has emerged, and it seems that changes in interest rates are set to be far more volatile as a result.