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Thinking of buying in Britain? In these uncertain times, preparation is key

7 November 2019

International

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We live in uncertain and rapidly changing times and change in the UK marketplace for businesses, particularly in the retail sector, has never been faster. 

These changes are partly brought about by the global economy but also by new technology. In the retail market the way consumers make a purchase has moved significantly over the last 10 years, with the advent of companies such as Amazon and other online service providers.

Many commentators have attributed the failure of several well known UK high street brands to these marketplace changes.  Companies like House of Fraser, Hamleys, Pizza Express and Thomas Cook have been pillars of British high street for many years.

Now several of these companies are struggling to make a profit - or have disappeared altogether

Foreign ownership not a factor

It is easy to understand how a company like Hamleys might be affected by changes to the way people shop or Thomas Cook be affected by changes in the holiday market. Hamleys, for example, will have high overhead costs with its prime location stores and not benefit from the convenience of Amazon. Holiday makers now do not need to visit a Thomas Cook store – they can do the same thing themselves online.

It is less easy to understand whether Chinese ownership is also a factor, as suggested by some.

For example, are Chinese investors paying too much for the companies that they buy, are they buying the right companies, and do they understand the marketplace in which they are investing?

All these factors may be an influence in the success (or lack of success) of an investment. However, they are neither unique to Chinese investors nor restricted to Asian companies buying in the west. If a UK company bought in China then it would not be surprising if they faced similar issues.

Look before you leap

There are many reasons why such companies might fail, and in each case it is important to consider the reason for their difficulties. For example, in some cases a business might be very profitable but be saddled by a significant debt burden that it is struggling to service.

The good news is that all these difficulties can be mitigated by taking the right advice at the start of any investment consideration.

James Cowper Kreston specialise in acting for companies and individuals who want to invest in the UK to ensure that the right targets are identified, the marketplace is understood and the right price is paid.