‘Disappointment’ and muted activity: Dealmakers sour on UK market
UK dealmakers’ faith in the economy has slumped to its lowest in nine years with executives blaming a string of policy blunders and a sluggish deal environment for weighing on market activity.
Over half of Britain’s private equity and corporate finance bosses feel negative about the next 18-24 months, according to a fresh poll of the sector which also found 72 per cent of the buyout industry saying the government is “not doing a good job”.
The damning assessment of the UK’s political leadership was the weakest score recorded since the annual study by consultancy firm CIL began nine years ago. Respondents overwhelmingly cited the absence of any credible growth plan and the throng of tax hikes introduced at last year’s Budget for killing off animal spirits in the Square Mile, while several pointed to repeated U-turns as evidence of ministers’ “weak leadership”.
The Starmer administration has been forced to walk back from several spending decisions after it became clear the PM would not be able to corral enough of his backbench MPs into voting for them. Those followed a historic maiden Buddget last autumn, at which the Chancellor unveiled more than £40bn worth of tax rises to fund additional spending for public services.
Sentiment surrounding dealmakers’ own interests also fell sharply, with just 44 per cent feeling positive about their portfolios or businesses; a drop of 10 per cent from last year. Deals in the capital have been less free-flowing than many expected, with respondents blaming persistently high valuations and a lack of momentum for extinguishing hopes of activity picking up through 2025.
Activity among dealmakers muted
A majority of dealmakers labelled their firm’s activity in the year to date as ‘muted’, while just a third rated their pipeline average or high. And even though over half expect merger and acquisition activity to improve over the next 12 months, this marked a 25 per cent drop from the same question a year ago, when three-quarters predicted improvement.
“This year’s findings reveal a marked deterioration in confidence: pessimism about the long-term economic outlook has reached record levels, dissatisfaction with government policy is at an all-time high, and deal activity remains sluggish,” said Alex Marshall, senior partner at the CIL, the consultancy behind the annual study.
“While some positives remain – pent-up demand, stable credit markets, and the steadying effect of lower inflation – the prevailing view is one of disappointment. Stability, once again, has failed to materialise.”
The bleak sentiment among dealmakers will come as worrying news to Chancellor Rachel Reeves, who has previously held up private markets as a key cog in the government’s growth drive. The Treasury wants to kickstart a glut of investment into UK private assets from domestic and foreign buyout firms.
And as part of its recent Mansion House Accord, is encouraging the UK’s largest pension funds to invest at least 10 per cent of their portfolios into infrastructure and private equity, in a bid to revive the country’s flagging economy.