UK M&A activity experiencing a "major pause" due to looming EU referendum, market volatility and weakening pound

William Turvill
Follow William
A picture taken 17 April 2007 in London...
Foreign spending on UK acquisitions has fallen by a third year on year (Source: Getty)

The looming EU referendum, market volatility and the weakening of the pound have contributed to a fall in UK M&A activity, new research has found.

Foreign spending on British acquisitions has dipped by nearly a third so far this year, according to Deloitte.

Between 1 January and 8 March foreign buyers spent $24.4bn (£17.1bn) on acquiring British companies. This was down from $34.9bn in the same period last year.

Read more: M&A deals slow as EU referendum looms

And in the same period, domestic M&A deal values have fallen from $12.6bn to $6.1bn.

Outbound M&A by UK companies, meanwhile, has fallen from $6.1bn to $1.7bn.

In addition to the total value of M&A falling, Deloitte also said there has been a decline in the number of deals. Inbound deals fell from 174 to 141, domestic deals from 304 to 183 and outbound deals from 168 to 119.

Iain Macmillan, head of global M&A at Deloitte, said: “Interest from overseas buyers in UK businesses remains.

"However, market volatility, the weakening of the pound and the upcoming European referendum are causing a major pause in domestic and outbound dealmaking.”

Read more: Here's why 2015 has been such a bumper year for M&A

According to Deloitte, European buyers have led inbound interest. During the period, European companies have recorded $15bn of deals, up from $4.9bn in 2015. North American buyers contributed $5.6bn, down from $8.3bn.

Last year was widely regarded to have been a record period for global M&A, with deal values topping $5 trillion.

UK inbound deals totalled $328bn, up from $90bn in 2014, according to Deloitte.

Macmillan added: “This year it should be expected that high levels of uncertainty, both market and political, would cause a temporary pause in the M&A markets.

"For now, European buyers are still investing heavily in UK companies, but whether we return to the previous levels of M&A remains to be seen.”