The UK has fallen out of the top five M&A destinations for the first time thanks to uncertainty over Brexit

William Turvill
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EU Referendum - Signage And Symbols
The UK voted to leave the European Union on 23 June (Source: Getty)

The UK’s Brexit vote, and resulting uncertainty, has pushed the UK down the pecking order of countries global executives want to invest in, a new report has suggested.

But EY’s Global Capital Confidence Barometer predicted that the UK will “bounce back as a top M&A destination of choice” after a short-term “pause for thought”.

The top investment destinations, based on a survey of more than 1,700 executives in 45 countries, were named as the US, China, Germany, Canada, France and Japan, with the UK coming in seventh.

Read more: Brexit uncertainty and looming US election stifling cross-border M&A

1 – United States

2 – China

3 – Germany

4 – Canada

5 – France

6 – Japan

7 – United Kingdom

8 – India

9 – Brazil

10 – Australia

This was the first time in the report’s seven-year history that the UK dropped outside of the top five investment destinations.

The report said:

Brexit is a prominent example of the rise of geopolitical changes that are adding complexity to cross-border investments. In the longer term, we would expect the UK to bounce back as a top M&A destination of choice but the short-term uncertainty is giving investors pause for thought.

Read more: M&A and private equity deal values dip despite Brexit bargain hunt

There are, in general, mixed opinions around the UK's M&A prospects after the Brexit vote.

Initially, experts predicted that activity would drop further in the second half of the year following a slow start to 2016, both in the UK and globally.

But the £24bn takeover of Cambridge-based Arm by Japan's SoftBank sparked hopes of an M&A revival, prompted in part by the devaluation of sterling making UK firms more affordable.

Then, in September, British company Micro Focus's $8.8bn of the software division of US giant Hewlett Packard was hailed as an assertion of post-Brexit confidence.

Mergermarket’s review of third-quarter UK M&A found a marked improvement on the second quarter. However, total deal values in the first three quarters overall came in at £70bn, down 44.5 per cent on the same period in 2015.

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