The British dealmaker is not a naturally gloomy species. Yet CIL’s latest Investment 360 Index finds them in an uncharacteristically dark mood. Sentiment about the UK’s short-term economic outlook has fallen off a cliff.
Some 57 per cent of respondents now expect conditions to worsen over the next 18 to 24 months; barely 13 per cent are optimistic. A year ago, the proportions were almost reversed.
The culprit, unsurprisingly, is Westminster. Fully 72 per cent of the 112 investors, advisers and management teams surveyed believe the government is doing a poor job — the worst score since the Index began nine years ago.
The grievances are familiar: no credible growth plan, a muddled tax strategy and a string of policy U-turns that have shredded confidence. One respondent described the approach as “a shambles and hugely damaging to their credibility domestically.” Even by the low bar of post-Brexit policymaking, that stings.
Longer term sentiment is positive
The gloom has not yet curdled into panic, but it has deepened. Long-term sentiment remains marginally positive, though at record lows: 40 per cent are upbeat about the UK’s prospects, down from 59 per cent a year ago. Nearly a quarter are outright pessimists, double last year’s share. The rest sit on the fence, hoping that someone — the Bank of England, the Treasury, perhaps the next government — will eventually engineer something resembling stability.
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For now, that word remains elusive. Fewer than half of respondents feel positive about the investment environment for their own businesses or portfolios, down from 54 per cent last year. Many see glimmers of opportunity: capital is ready to deploy, valuations have begun to settle and credit markets are functioning. But enthusiasm is tempered by caution. Pent-up demand can only go so far when the policy backdrop is unpredictable and growth anaemic.
UK M&A activity remains subdued
M&A activity, the lifeblood of dealmakers, remains subdued. Only a third of respondents rate current deal flow as average or high, and most describe the market as quiet. Just over half expect activity to rise in the next 12 months — a sharp drop from the three-quarters who predicted improvement in 2024. Still, this is better than the trough of 2023, when only 28 per cent saw deal activity at average or higher levels; that number has edged up to 31 per cent. The mood has improved from despair to weary acceptance.
Asset quality perceptions are steady but uninspiring: 23 per cent describe assets as good, 68 per cent as average — virtually unchanged from last year. Yet expectations for improvement have softened, with only 38 per cent anticipating a rise in quality over the coming year, down from 55 per cent previously. In other words, dealmakers think things are fine — just not getting better any time soon.
Alex Marshall, senior partner at CIL, calls the findings “a marked deterioration in confidence,” noting record pessimism on the long-term outlook and record dissatisfaction with government policy. The few bright spots — lower inflation, a functioning credit market, some residual demand — are offset by a pervasive sense of disappointment.
For Britain’s dealmakers, this is becoming an old story. Each year promises stability; each year defers it. The patience of investors, like their optimism, is wearing thin. Until policy steadies and growth returns, the UK’s private-capital market looks destined to trade in the same currency as the rest of the economy: low expectations.
