In the UK, 84% of executives are actively planning to respond strategically to ongoing geopolitical, trade or tariff uncertainty, compared to 64% globally. Just under a fifth of UK respondents plan to reconfigure their supply chains, while 15% plan to move the location of their offices and management. UK respondents also rank the need to ‘‘expand existing products into a new overseas market” as their top strategic priority, in contrast to global respondents who are prioritizing the need to use technology to retain new customers.
The trade theme also comes through strongly in UK deal intentions. In the face of existential threats to their business models, companies need to act fast and M&A provides greater speed than investment alone. More than half of all UK respondents are pursuing or are considering pursuing an acquisition in response to trade or tariff uncertainties. For almost a quarter of UK executives, responding to regulatory, trade or tariff changes is their top strategic driver for M&A. This ranks ahead of the global priority of “acquiring new technology, production capacity or innovative start-ups.”
Technological disruption remains a significant strategic and transaction driver for UK companies. But there is a risk that capital is diverted into this additional need to adapt swiftly to a new trading and regulatory landscape, with long-term consequences. EY’s survey indicates that UK respondents have a less optimistic view of the future than their global peers, with 62% of UK executives anticipating an economic slowdown in the near-to-medium term, compared to 46% at a global level. Of those who expect a downturn, 50% expect to see this in the next 12 months.
The UK’s attraction
Set against the UK’s challenges are continuing economic resilience and other significant advantages for inward investment. The UK is still the second most likely place for global CCB21 respondents to pursue an acquisition in the next 12 months, falling back one place from CCB20 as the US regains its top spot.
This continuing attractiveness, the need for UK companies to reposition their portfolios, and the drive to consolidate and cut costs should ensure that UK companies remain active in both domestic and cross-border transactions. Our UK respondents certainly envisage a busy but potentially more difficult year in the deal market. In CCB21, 60% of UK respondents expect their deal pipeline to increase, but the percentage predicting more deal completions has fallen to 59%, from 89% just six months ago. The same forces that drive deal appetites, could also thwart them.