U.K. Deal Prospects Plummet Amid Mounting Brexit Worry, EY Says

(Bloomberg) -- Uncertainty surrounding Brexit has driven expectations among executives for new merger deals in the U.K. to a four-year low, according to a poll by advisory services firm EY.

Only 45 percent of executives expect to actively pursue acquisitions in the next year, a drop of 20 percentage points since July, according to an EY survey that took in 156 firms in the U.K. The research for EY's Capital Confidence Barometer is part of a wider poll of 2,600 senior executives from 45 countries, the consultancy said in comments released on Monday.

Confidence in the U.K. economy slipped five percentage points to 63 percent, though 86 percent of U.K. respondents said the global economy was improving, EY said.

"Lower domestic growth, combined with rising U.K. wage costs, Brexit-related disruption and the impact of a weaker pound on import prices are all front of mind for U.K. business leaders," EY's Managing Partner for transaction advisory services Steve Ivermee said. "Longer term, the need to get ahead of technological disruption and seek growth from new markets is likely to sustain M&A activity."

The gloomy outlook comes after U.S. companies more than doubled the amount they've agreed to spend on U.K. targets this year compared to the same period a year earlier, according to data compiled by Bloomberg. The American acquirers aren't as concerned about Brexit as their European counterparts, and the decline in the value of sterling since 2014 has made U.K. assets attractive, according to a report by consulting and accountancy firm Moore Stephens in September.

To contact the reporter on this story: Franz Wild in London at fwild@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Chris Vellacott, Andras Gergely

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