A stable policy environment is critical if the UK Government is to boost M&A activity, according to more than half (56%) of UK dealmakers who took part in CIL’s Investment 360 Index survey, citing it as the top priority to be addressed.
Other key priorities include closer alignment with the European Union (33%), easier access to finance for SMEs (23%) and improving labour market flexibility and mobility (23%).
The Investment 360 Index is based on research with 138 UK market stakeholders, including private equity investors, management teams, corporate finance providers and business advisors, and has been run by CIL, the independent international management consultancy, since 2017.
While views on the Labour Government’s performance are mostly mixed, with 49% expressing uncertainty, 18% of respondents believe it is doing a good job – marking the highest positive sentiment towards any government since the survey began. This compares to just 8% in 2023 and 3% in 2022, showing a notable shift in perception.
Almost half (48%) of respondents think that fiscal policy should stay the same or it should loosen (40%). Meanwhile, respondents’ expectations of the BoE base rate also supports the general view that stability is possible, with 59% expecting the base rate to level out at a healthy 3-3.9% by Summer 2026.
However, despite this early positive sentiment, over two thirds (64%) of respondents believe Labour will negatively affect the private equity industry. This apprehension largely stems from concerns around potential changes to capital gains tax, taxes on carried interest, and other wealth taxes.
Commenting on the findings of the Investment 360 Index, Alex Marshall, Senior Partner at CIL, said: “There’s growing optimism among dealmakers, but this could quickly evaporate if tax increases are disproportionate and deter investors and entrepreneurs, who are crucial for driving economic growth.
“Despite the concerns over tax policy, our research highlights a relatively positive view of Labour’s performance. Nearly half of our respondents are from private equity, and they appear willing to accept some short-term pain to secure the long-term stability they crave. However, this balancing act is critical – the Government needs to raise revenue without stifling growth, and at the same time, the UK must increase spending to foster innovation.”
