Foreign firms have put the brakes on buying British rivals this year in response to Brexit uncertainty, despite the lure of snapping up businesses that have tumbled in value after a slump in the pound.

A study of UK buyouts and merger deals involving foreign firms showed that the value of purchases of British-owned businesses fell in the first nine months of the year to its lowest level since 2010.

The internal study by the consultancy EY, seen by the Guardian, found that the value of deals so far this year was roughly two-thirds of the average reported over the last seven years.
British firms are awash with cash after three years of bumper profits. The combination of strong balance sheets and the low pound was expected to make them the target of foreigns takeovers or mergers that involve selling a large portion of their business to foreign buyers.

But EY said the lack of interest in buying UK firms "suggests a possible fall in confidence" as the UK's economic prospects have become clouded in uncertainty.

Mark Gregory, EY's chief UK economist, said the UK was missing out on a global trend for an increasing number of mergers and buyouts, with firms in the eurozone experiencing a surge of cross-border activity in the last year.

He said: "The fall in the value of foreign mergers and acquisitions of UK companies suggests a possible fall in confidence about the UK's economic prospects.
He said many of the deals were large companies hoovering up smaller rivals' new skills and technology as an alternative to R&D.

The UK's GDP growth slowed this year to rank as the lowest in the G7. The Organisation for Economic Cooperation and Development (OECD) expects the UK growth rate to slip further next year, keeping it at the bottom of the growth league.

EY said its study, which covers deals worth more than $100m and excludes property deals, was a "a good guide to corporate sentiment" and Britain’s relative attractiveness as a destination for foreign investment.

"The UK M&A market recovered slowly after the financial crisis but announced deal values recovered to post-crash highs in 2014 and 2015. The market slowed in 2016 and this trend has continued in 2017 with deal values and volumes well below those of 2015," it added.

Culled from The Guardian Newspaper, October 2017