UBBC’s Ashley Goodall attended the Allen and Overy Strategy Council investment conference last week and the Herbert Smith event. UBBC are partners to Strategy council for both these events and Baroness Nicholson, Chair of UBBC, made an opening speech at the Herbert Smith event.
The events can be characterised by a strong line up of financiers, investors, companies, and consultants who reiterated themes that can be summed up thus:
There is a great deal of diverse sector business opportunity in Ukraine, but private sector investors are reticent about entering the market as the risks are still too great (Buildings and assets, personnel, governance) and have yet to move significantly into the market. This status is unlikely to change Unless Governments underwrite activity with war insurance. This is an issue about political will.
However, for those early adopters and investors, the rewards will be very good long term and the costs of entry will be significantly higher (esp investment ebita multiples) once the war has subsided or insurance is available.
The Ukrainian economy has proven to be resilient and is expected to grow 5% this year and in the medium term, with some sectors like Tech doing well. However, the economy has still shrunk and is suffering from loss of capability as talent is in the military or have left the country and logistical issues persist on roads, railways, and the ports. However, grain and commodity exports are now leaving via the Black Sea. Ukrainians are deploying innovation and best in class technology as sectors are being rebuilt- in particular the energy sector , where renewables are being deployed and companies are expanding into adjacent Eu countries.
Ukraine is relatively well serviced with liquidity for the medium term, not least as UKR Gov bonds provide good return (inflation is relatively low) and retail investors and EU and others have provided good grants and liquidity. On the other hand, as returns are good from Gov bonds, they outweigh risks of investment, so ironically undermining private sector capital into businesses.
In general, the opportunity to rebuild Ukraine is significant, but until Insurance is in place, the response will be muted.