Confidence not leading to deals, says E&Y

A MAJOR rebound in confidence in the global economy among UK corporates is not yet translating into capital investment and deal activity, according to the accountancy group Ernst & Young.

Its Capital Confidence barometer, which surveyed 1,600 senior executives, shows that 93% of UK companies view the global economy as either stable or improving.

The surge in confidence has been fuelled by positive expectations around economic growth globally, corporate earnings and credit availability, says the report.

This increased confidence has fostered a strong consensus among UK corporates that mergers and acquisitions (M&A) will increase – 75% expect global deal volumes to rise over the next 12 months.

However, only 27% of major companies expect to make acquisitions in the same period, with organic growth the strategic preference for executives.

Tim Morris, M&A partner at Ernst & Young, said: “Business leaders have confidence in the global economy with the fundamentals such as improving credit conditions and realistic valuations, there to support these deals. But, this is not translating into widespread capital investment and M&A activity. What we are seeing is a ‘confidence paradox’ with planned activity contradicting expectations.

“While three quarters of corporates expect deal activity in the market to increase over the next year, far fewer have an intention to buy. This could create opportunity for bold executives to secure prime assets and steal a march over the competition.”