M&A advisors are significantly more optimistic about the economic climate

10 October 2024 Consultancy.uk

Close to half of UK dealmakers are now positive about the UK’s economic short-term. According to a new study from CIL, the number of investors with positive sentiment has risen by more almost 30%.

Late in 2023, CIL Management Consultants revealed that UK dealmakers were believed there will be an increase in deal activity in the next year. However, worries about the Bank of England’s monetary policy, and the economic management of the incumbent government meant that many were not positive when it come to the future of the country’s markets.

Amid this, during 2023, only 15% of those dealmakers had seen high or average current deal activity, and just 19% said that asset quality was good or average. As a result, 48% of dealmakers told CIL that they were negative about the short-term economic outlook.

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The firm’s latest benchmark shows a very different situation, however. Confidence among UK dealmakers is surging, according to the latest findings from CIL’s Investment 360 Index – with 48% of respondents now positive about the UK’s short-term economic outlook – a boom from the 19% that came into the year feeling good. At the same time, just 15% of respondents hold a negative view this year, with 34% remaining neutral.

Polling 138 UK market stakeholders, including private equity investors, management teams, corporate finance providers and business advisors, the survey has been run by CIL since 2017. And with M&A activity showing signs of recovery, the index suggests that, having hit its lowest point last year, there has been an improvement, with 28% now citing high or average current deal activity. Meanwhile, 24% of respondents now find their assets to be excellent, good or average – while 55% expect to raise that quality (compared to 48% in 2023).

How do you feel about the economic outlook for the UK in the short-term

Looking ahead, this means many have even brighter outlooks for the coming 12 months. With the UK’s political uncertainty having been put to bed (for now), and the economy remaining relatively stable, 76% of dealmakers now expect an increase in M&A activity. Meanwhile, 18% anticipate stable levels. This points to cautious optimism in the business and investment communities.

Commenting on the findings, Alex Marshall, a senior partner at CIL, noted, “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.”