M&A activity drops amid tumultuous economic picture

While many experts expected the UK’s mergers and acquisitions market was set to turn a corner in 2025, its sluggish activity has continued deep into the year. According to a new study from PwC, momentum has been restrained by volatility linked to the trade policies of the world’s largest economy, and mounting geopolitical tensions in Europe.

Many markets have struggled in the first half of 2025 thanks to these conditions. In the first six months of the year, for example, total IPO proceeds in Europe reached €4.0 billion driven by 16 IPOs in Q1 raising €3.1 billion – a considerable fall from the same period in 2024, which saw €11.5 billion raised.

In the UK, the mergers and acquisitions (M&A) market for the first half of 2025 recorded a total deal value of £57.3 billion. According to PwC’s latest Global M&A Industry Trends report, this represents a 12.3% decline compared to £65.3 billion in the same period last year. Deal volume also softened, with the UK seeing 1,478 transactions, down 19.1% from 1,828 in the year before, reflecting a more selective market environment.

Lucy Stapleton, global head of deals for PwC’s UK wing, commented, “The UK M&A market in 2025 has been characterised by a sense of restrained momentum. There’s a strong pipeline of deals ready to go, but many remain paused due to ongoing volatility. That said, the fundamentals are encouraging as interest rates are easing, liquidity is improving, and equity markets are strong. We’re seeing a shift from passive optimism to active investment.”

Despite the contraction in overall deal volume, the average deal size reached £169.2 million, based solely on transactions with disclosed values. This signals a pivot towards fewer but more strategic transactions – with some sectors in particular enjoying stronger runs, due to their perceived value.

Leading segments

Industrials and services led the market with 400 deals, over half of which were in the business services sector where investors remain focused on scalable, tech-enabled and resilient sectors. This was followed by consumer markets at 310 deals, and technology, media and telecommunications on 307 deals. Meanwhile, in terms of deal value, financial services topped the charts with £17.0 billion, largely driven by four deals each greater than £1 billion in value. Technology, media and telecommunications followed at £10.8 billion.

Looking ahead, PwC maintains that the UK M&A market is still poised for further growth in the second half of 2025. But this remains contingent on macroeconomic stability and resolution of geopolitical uncertainties – something which commentators in those fields would find highly unlikely. Especially before the end of the year.

But, should the US decide to stop trying to hobble its leading trading partners with punitive tariffs, and the wars in Ukraine and Gaza suddenly come to an end, there might be time for an M&A boom. Especially with “capital for dealmaking available and strategic imperatives clear”, something which means “current conditions suggest a stable environment for dealmaking.”

Stapleton added, “Key sectors continue to attract investment, driven by long-term strategic priorities and megatrends such as digital transformation, energy transition, and healthcare innovation. This isn’t just about operational improvement. It’s about generating real value by supporting management teams, investing in transformation, and understanding how assets fit into broader ecosystems.”