International mergers and acquisitions (M&A) activity in the UK slumped to its lowest level in almost three years.
Official data showed that 127 M&A deals were finalised in the first quarter of 2017, with just 40 foreign firms buying UK-based companies. These purchases by overseas firms amounted to £5.1bn, the lowest level since the fourth quarter of 2014.
The figures represent a sharp drop on the prior quarter when a total of 188 deals were completed and when the value of acquisitions by foreign companies in the UK alone reached an unusually high level of £85bn. This was the highest value since 2006.
“The value of inward M&A activity recorded in 2016 was unusually high and dominated by a small handful of very-high-value transactions,” said the UK´s Office for National Statistics.
A decline in the pound following last year´s Brexit vote on 23 June has made UK companies a more compelling prospect for foreign buyers. Despite having recovered some of its lost ground this year, sterling remains around 12% lower against the US dollar.
However, the weaker M&A activity could also be a sign that overseas companies are beginning to get cold feet given the uncertainty surrounding Brexit negotiations. There is also a UK general election on 8 June.