The Brexit vote will cost the UK up to USD 338 billion in lost merger-and-acquisition (M&A) activity by 2020 and the global economy up to USD 1.6 trillion, law firm Baker & McKenzie said on Monday.
"An active M&A market is all about confidence and credibility," Michael DeFranco, global chair of M&A at Baker & McKenzie, said in a report.
"To restore that confidence the UK government will need to get to grips with the enormous challenge of negotiating a new trading relationship with the EU as quickly as practically possible. Otherwise we move into more dangerous territory," he added.
The forecasts above are based on an adverse scenario where Brexit incites growing populism in mainland Europe and undermines EU support among remaining members.
In Baker & McKenzie's central forecast, Brexit still knocks USD 239 billion off UK M&A activity by 2020 and USD 409 billion off global volumes. In 2017 alone, UK M&A transactions are seen falling by 33 percent.
"In the last few days we have seen evidence that the M&A market in the UK won't come to a crashing halt even if it won't be at its previous pace," Tim Gee, London M&A partner at Baker & McKenzie, said.
"There are still plenty of buyers and sellers for the right deal at the right price. There are already some clear upsides — global organizations looking to acquire UK companies will find that a weaker pound makes UK valuations more attractive, although the uncertainty surrounding trade negotiations could deter the more risk averse," he added.
Baker & McKenzie said stock market listings (IPOs) would be hit by the Brexit vote.
"The picture for IPOs is equally depressed, as these flows tend to be even more sensitive to confidence effects than M&A transactions, so the UK market is likely to remain relatively quiet over at least the next couple of years," it warned.