New research reveals a sharp fall in sentiment towards the UK’s investment environment, even though overall it remains positive, according to the annual Investment 360 Index conducted by management consultancy CIL.
The Index is based on research amongst private equity investors, management teams, corporate debt providers and business advisors in the UK and has been running for three years.
The majority (79 per cent) of respondents are positive or neutral towards the investment environment, compared to 91 per cent last year. This is despite negative sentiment towards the short-term economic outlook which has increased from 49 per cent in 2018 to 67 per cent in 2019.
In terms of M&A activity, respondents still largely believe that it is more of a seller’s than a buyer’s market – but there has been a material rebalancing in sentiment. Some 70 per cent of respondents felt that it was a seller’s market in 2018 compared to just 45 per cent this year. One fifth (20 per cent) of respondents felt that it was now a buyer’s market compared to 9 per cent in in 2018.
Brexit will also affect the volume and value of the UK’s M&A market in 2020 according to the research. Over half (58 per cent) of respondents predict that M&A volumes will decline and a further 50 per cent believe that valuations will also drop.
Giles Johnson, partner at CIL, says: “Our Index suggests that Brexit will dampen M&A activity in 2020 as investors choose to ride out the storm until there’s greater certainty and markets settle down. However, the fact remains that the UK still offers a positive investment environment, with private equity firms sitting on a lot of dry powder.”
