Optimism among UK dealmakers has hit its highest level since the post-COVID dealmaking boom in 2021, with close to half of investors saying they are now positive about the UK’s short-term economic prospects.
CIL Management Consultants latest Investment 360 Index has found that the number of UK investors voicing positive sentiment has increased by close to 30 per cent compared to last year.
The Investment 360 Index, which has been run by CIL since 2017, polled 138 UK market stakeholders, including private equity investors, corporate finance providers, management teams and business advisors, to gauge sentiment around M&A and the UK’s overall economic prospects.
In last year’s survey, dealmakers said that they felt there would be an increase in M&A activity during 2024. However, respondents also voiced major concerns about Bank of England monetary policy and the incumbent Conservative government’s economic management at the time.
This meant that there was a significant lack of positivity about the future of the UK’s markets and M&A activity. In 2023, just 15 per cent of dealmakers polled said they had seen high or average current dealmaking activity, with just 19 per cent describing the quality of assets as good or average. As a result, 48 per cent said that they were negative about the short-term economic outlook.
However, this year’s survey shows that there has been a major increase in confidence among UK dealmakers, with 48 per cent of respondents now saying they were positive about the UK’s short-term economic prospects, up from just 19 per cent at the start of 2024.
With M&A having hit its lowest point last year, this year’s survey also reflects an improvement, with 28 per cent of respondents saying that current deal activity was high or average. 24 per cent, meanwhile, reported that assets are excellent, good or average and 55 per cent said they expected to raise that quality (up from 48 per cent last year).
M&A optimism is also high, with 76 per cent of dealmakers expecting an increase in M&A activity over the coming 12 months, amid improved political and economic stability in the UK, while 18 per cent expect stable levels of dealmaking.
Commenting on the findings, Alex Marshall, a senior partner at CIL, said: “The index has recorded its highest level of positive sentiment toward the UK’s short-term economic outlook since the post-COVID M&A surge in 2021. Key drivers behind this optimism include easing interest rates and the stability expected from a new Labour Government.”
“We are also seeing signs of improvement in M&A activity and asset quality, so we can be cautiously optimistic. While we won’t see an immediate acceleration in the deal environment, the improvements are encouraging, and we expect a gradual upward trajectory.”
Despite the optimism, Marshall also noted that there would likely be “some pain before the recovery”, with potential tax increases likely to hamper confidence among consumers and businesses.
A recovery in private equity investment could be key to a resurgence in UK M&A activity over the coming year
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