Appetite for UK firms fades

Appetite for UK firms fades

New figures chart a 94% plunge in long distance M&A activity while eurozone fears ensure corporate confidence at home remains subdued.

The value of mergers and acquisitions involving UK companies remains low, new figures published today show, as expenditure abroad by UK firms plunges by 94% in a quarter.

The values of inward, outward and domestic acquisitions all decreased in quarter one 2012 compared with the previous quarter, the ONS said this morning.

Expenditure on acquisitions abroad by UK companies (outward acquisitions) fell from £12.6bn in quarter four 2011 to £0.7bn in quarter one 2012 - the lowest quarterly level for acquisitions since the series began in quarter one 1987.

Inward acquisitions in the UK by foreign companies fell from £12.4bn in quarter four 2011 to £3.9bn in the first quarter of 2012, the lowest value reported since quarter two 2010 when the value was £2.8bn.

Acquisitions between UK firms fell from £1.8bn to £1.1bn in the period, while the net value of cross border transactions reported for quarter one 2012 is minus £5.3bn.

“This is likely to be affected by concerns over the Eurozone debt and concerns about economic growth,” the ONS report said.

There were 21 disposals reported in quarter four 2011 with a value of £4.1bn, compared with three disposals reported in quarter one 2012 with a total value of £2.1bn, a decrease of 49%.

The most significant transaction in quarter one 2012 was the disposal by Old Mutual Plc of Skandia Insurance Company Ltd of Sweden for a press reported value of £2.1bn.

Meanwhile, a separate report published today by Lloyds charts a dip in business confidence amid eurozone crisis fears and the lingering prospect of a Greek exit.

The Lloyds Bank Wholesale Banking and Markets Business Barometer fell to minus 21% from 26% last month, meaning most respondents are negative on the view of the economy.

The eurozone crisis continued to escalate throughout May as fears grew over the health of the Spanish economy and the possibility of Greece exiting the euro.

Trevor Williams, chief economist at Lloyds Bank Wholesale Banking & Markets, said: "The renewed concern around the eurozone is clearly having an impact on businesses' sentiment towards prospects for the UK economy and, to a lesser extent, to their own prospects

Businesses' confidence in relation to their own prospects currently stands at 35%, down eight points on April's 43%, Lloyds said, which still remains higher than during the worst of the financial crisis in 2008/09.

The survey data suggest an underlying 0.2% growth in gross domestic product (GDP) between April and June, Lloyds said, but only once the impact of the Diamond Jubilee is taken into account, which is likely to have reduced growth by 0.5 percentage points.

The most notable declines in confidence in May came in the North and Midlands and in the retail and distribution sector