The UK is the third most attractive destination for M&A deals, according to EY

 
Georgina Varley
General Election - Economy
The UK has reclaimed its place as the third most attractive destination for deals (Source: Getty)

Over half of UK companies are expected to pursue mergers and acquisitions (M&A) in the next 12 months, up three per cent from October 2016.

According to EY’s 16th Global Capital Confidence Barometer (CCB16), almost a quarter of respondents are putting greater significance on growth that is not organic, especially joint ventures and alliances. Six years ago, only 13 per cent believed that such tie-ups would lead to growth.

In contrast, there has been an 11 per cent decrease in the number of businesses expecting their growth to come from organic sources since EY's CCB15 in October last year.

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Steve Ivermee, EY’s transaction advisory services managing partner, said: "UK companies are adjusting their strategies to maximise growth opportunities and protect margins amid changing market dynamics at home and abroad."

Clarity over the timeline for Brexit negotiations, following the triggering of Article 50, has increased the chances of global businesses investing in the UK, with nearly a quarter of respondents saying they would put money into the UK.

As a result, the UK has reclaimed its place as the third most attractive destination for deals, having fallen out of the top five for the first time last October. In addition, over half of the UK companies featured expect the domestic economy to improve over the next 12 months, a figure which has risen dramatically from 4 per cent last year.

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"That the UK remains a top destination for domestic and global companies to do deals, is a measure of its continuing attractiveness. The UK, however, will need to work hard to maintain its position as the Brexit negotiations unfold," said Ivermee.

EY's CCB16 also revealed that the biggest economic risks for UK companies in the next six-to-twelve months include currency instability (15 per cent), movement of labour (13 per cent) and trade flows (13 per cent).

"Successful companies will find ways to navigate these challenges. Executives are evaluating M&A across a wide range of geographies to secure market access and grow their customer base," added Ivermee.

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