Partner Article

UK acquisitions reach lowest levels since 1983

Domestic acquisitions made in the UK plummeted to £3.3bn last year, the lowest levels seen since 1983.

Spending from foreign firms on UK acquisitions also plunged across 2012 to £16.7bn, which is the lowest value posted since 2003.

British businesses also put on a dampener on merger and acquisition (M&A) activity at the end of the year with a significant drop in domestic, inward and outward deals.

Money spent on overseas transactions plunged from £8.2bn in quarter three to just £1.3bn in the last three months of the year, according to the latest figures from the Office of National Statistics (ONS).

Inward investment followed a similar trend and decreased from £8.2bn to £1.6bn in the fourth quarter, while M&A activity between UK companies remained steady with the previous three months at £0.6bn.

The data released by ONS is in line with figures from Ernst and Young, Experian and the latest issue of Global Investment Trends, who all reported that M&A activity was down last year.

ONS said: “Both UK and global economic conditions remained subdued in the final quarter of 2012. GDP contracted on a quarterly basis after growth in the third quarter that was partly as a result of special one-off factors.

“Overall, the underlying economic conditions remained weak throughout the year. However indicators of financial market activity suggest that conditions improved towards the end of the year.”

Graeme Leach, chief economist at the Institute of Directors, said: “The dire M&A statistics show yet again how this economic recovery is very different with weak confidence and a damaged financial system.”

Jon Hughes, head of Ernst and Young, commented: “The latest ONS M&A statistics have reaffirmed what we saw last year across the UK M&A market, with caution and a lack of confidence underpinning sentiment, creating a bias towards risk avoidance and corporate inertia.

“The Eurozone countries have, up until the crisis, provided happy hunting ground for UK corporates but the volatility and uncertainty has tempered their appetite to invest as the ONS statistics reveal.

“This is not to say, however, that there are not good opportunities to be had and the more businesses in the UK stall investment and acquisition plans in the hope of an economic upturn, the more they will lose out to their international competitors who are being bolder and braver.”

“Looking forward to 2013, value and growth are not going to be created by waiting for a major upturn that is a long way off - business leaders must identify opportunities to break into high growth economies, transform their business models to reflect the new normal and gain market share by targeted inorganic growth.”

This was posted in Bdaily's Members' News section by Miranda Dobson .