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The UK’s business community has not taken fright over the new Labour government, according to the former treasurer of the Conservative party, as he called on the Tories to unite and offer a “credible” opposition.
Malik Karim, the former Tory treasurer who leads boutique investment bank Fenchurch Advisory, said there was “no massive change” in sentiment since Labour swept to power in this summer’s general election after 14 years of rule by the Conservatives.
Since then, Labour has sought to woo businesses, including hosting an investment summit in London earlier this month. However, some of Labour’s policies — set to be unveiled in Wednesday’s budget announcement — have drawn condemnation from businesses such as plans to raise capital gains taxes. The Federation of Small Businesses meanwhile called the government’s landmark employment rights bill “rushed, chaotic and poorly planned”.
There are also fears in the City of London that a lack of initial public offerings and a potential rise in taxes on the profits that private equity executives earn could dent the market.
“I’m not a doom-and-gloom merchant about London,” Karim, who was the party’s treasurer from 2021 to 2022, told the Financial Times. “I haven’t seen a sort of systematic drain of talent, or people wishing to leave London just because of a taxation reason.”
He added that the Conservatives’ top issue now would be “to unite and provide a credible opposition to the government of the day and win back the trust of the British electorate.”
Karim, whose family arrived in the UK as refugees from Uganda, established his advisory Fenchurch in 2003 after previously working at Credit Suisse, DLJ and Kleinwort Benson. His boutique focuses on the financial sector, including advising asset managers and insurers.
He has grown the business over 21 years to generate a £44.4mn profit off £61.5mn in turnover for the year ending March 31, according to the group’s latest financial results. That marks a jump from a £33.7mn profit in the year prior.
He attributes the rise in profits to an uptick in mergers and acquisitions that has seen private equity circle blue-chip UK companies, consolidation among banks, and mooted tie-ups among insurers and asset managers amid broad shifts in their industries.
Fenchurch generated £18.4mn of its turnover outside the UK in its latest year. Karim personally took home more than £12mn of profit in the past fiscal year.
Fenchurch has advised on notable deals in recent months such as the £5.4bn acquisition of UK-listed-investment site Hargreaves Lansdown by a consortium of private equity funds, the Co-operative Bank’s £780mn sale to Coventry Building Society, and French investor Wendel’s acquisition of US credit group Monroe Capital for more than $1bn.
The group has begun expanding from its base in London to the US, as well as further staffing up in the UK.
He said that he sees major shifts in the financial sector providing further momentum for dealmaking, after a slowdown in the couple years following the pandemic.
Particularly, he pointed to a wave of tie-ups between investment groups and insurance companies, and the rise of the private credit industry as spurring activity.
Karim said that private credit investors posed a significant issue for large investment banks, which he claimed had neglected lending to the smaller and mid-sized businesses that private credit groups cater to.
He also said the growing prominence of private credit firms was accelerating the shift for bankers and dealmaking away from larger investment banks and towards smaller boutique operations by providing an alternative option for financing takeovers.
Karim said: “The flow of traffic from the big banks to independents is a bit of a tidal wave. We and other independents are going to capitalise on that.”
