UK deal-making at four-year low as business confidence struggles

The level of deal-making among companies across the UK dropped to the lowest level in four years in June amid a slow recovery of business confidence.

The number of deals involving British businesses fell by 16.8 per cent from 463 to 385 for the three months to the end of June, according to the Office for National Statistics. Over the quarter the mergers and acquisitions market declined from 148 deals in April to 93 deals in June, the lowest monthly figure since May 2020.

The total value of transactions fell from £11.8 billion to £13.8 billion as compared with the first quarter, with the value of domestic and cross-border deals both dropping by £1 billion.

The domestic market was supported by deals such as Compass Group’s acquisition of catering business CH&CO for £475 million, while international transactions included the takeover of Wincanton, the logistics specialist, by US giant GXO Logistics, for £762 million.

Caroline Rae, partner at law firm Herbert Smith Freehills, said: “The levels of UK mergers and acquisitions activity during the second quarter of 2024 are disappointing but not a surprise given the political uncertainty in the UK caused by the general election. However, we are cautiously optimistic that activity will pick up towards the end of the year as uncertainty over the economic outlook eases.”

Katherine Moir, partner at Clifford Chance, said: “As the dust settles and economic conditions stabilise, we expect inward M&A to pick up, driven more by strategic objectives than by opportunistic purchases, particularly from overseas investors looking to capitalise on the UK’s long-term growth potential.”

The Labour government’s plans for tax rises have now prompted reports of a rush to finalise deals and avoid any possible increase in capital gains tax on business disposals.

James Wild, head of M&A at consulting firm RSM UK, said: “The focus now for business owners is the upcoming autumn budget and the looming threat of an increase in capital gains tax, as sellers rush to get deals over the line. As a result, we expect the real increase in deal activity to be in the second half of the year.”