Weak Pound Makes UK Tech Investment Bargain for Gulf Sovereign Wealth Funds

Sovereign wealth funds (SWFs) of the Gulf Cooperation Council (GCC) are emerging as major centers of economic gravity whose movements affect the entire world, so when one of them indicates an interest in capitalizing on the weak pound to snap up U.K. tech companies, it may likely point to a wider trend.

According to Ibrahim Al Eisri, director general of private equity at the Oman Investment Authority (OIA), the wealth fund is considering investing in the United Kingdom’s technology sector to take advantage of falling valuations caused by rising interest rates and the slumping pound.

“We are looking at some deals […] given the market provides an opportunity right now to enter,” Al Eisri reportedly told Reuters on the sidelines of an event run by the Saudi Arabian SWF, adding that the fund is looking at several unlisted technology firms with an eye to expanding them.

The fact that many U.K. startups may be eyeing their funding runways with concern will come as no surprise. Compared to some of the headline-grabbing valuations the industry witnessed in 2021, investment seems to have dried up in 2022 and founders are having to settle for smaller checks or part with more equity.

As for initial public offerings (IPOs), there seems to have been a collective decision by the U.K.’s tech scene to put those on ice.

See more: FinTech Winter Chills Funding as Busted IPOs Litter Landscape

But as Al Eisri indicated, the current macroeconomic climate appears to have presented a significant opportunity for investors to benefit from major investment price cuts, especially investors holding large amounts of U.S. dollars.

And with founders feeling the pinch as funds dry up, attracting investment from the Middle East could give the startup ecosystem a needed boost, while creating more jobs and economic growth for the country than what has traditionally been the favorite target of Gulf funds — central London real estate.

The U.K. seems to be doing its part to help drive that investment, with the government setting about negotiating deals with some of the Middle East’s largest SWFs. For example, the UAE-UK Sovereign Investment Partnership announced an agreement last year that will see Abu Dhabi’s Mubadala Investment Company invest £10 billion in various U.K. sectors, including technology, infrastructure, and energy transition.

Related: UAE Attracts $700M in H1 2022 Investment, Maintains Position as MENA’s VC Capital

Hot on the heels of that deal, Qatar’s emir, Sheikh Tamim bin Hamad Al Thani agreed to a new strategic investment partnership in May 2021 that will see the Gulf state invest up to £10 billion in several U.K. sectors including FinTech, zero-emissions vehicles, life sciences and cybersecurity over the next five years.

GCC investment in the U.K. also takes place in the wider context of an anticipated trade deal with the six countries in the council —  Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. With talks underway, the U.K. government has claimed that the free trade agreement would contribute £1.6 billion (about $1.85 billion) a year to the country’s economy.

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