UK CEOs are feeling more confident about economic growth prospects over the next 12 months, despite the sluggish performance of the national economy. According to a new study from EY-Parthenon, leaders are moving from a reactive to proactive deal strategy.

A new survey of 100 UK CEOs has shown that 67% of the nation’s CEOs felt very or somewhat optimistic about the UK’s economic outlook for the next 12 months. The poll by EY-Parthenon suggested that when considering their own company, 73% felt very or somewhat confident about their company’s profitability over the next 12 months. At the same time, 68% said they felt positive about investment in new areas such as joint ventures or M&A.

In part, this may be because in times of heightened macroeconomic and geopolitical uncertainty, there is a preference for investing in developed markets and those with easy access to them. Illustrating this, the US in the top position for M&A activity, even with the uncertainty of the upcoming election. The US has been the driver of M&A over 2024, with more than half of all deals by value involving a US party. There is also a strong flow of other investments, especially in the semiconductor industry and in sustainability-led investments, boosted by policy support.

Likewise, the UK is another country that has been heavily involved in M&A in 2024, beating out China to secure the second spot. According to the researchers, the UK is a centre of many in-demand assets, from technology to life sciences and high-end manufacturing – and is one of the most attractive destinations for inward investment in Europe. If the new UK government can continue to reduce trading frictions with the European Union, they added that it will “likely further boost the country’s attractiveness”.

Beyond this, leaders identified a number of other reasons to be less optimistic, however. For example, 45%, identified emerging technologies, including AI, as one of the top disruptors for their industry and markets over the next 12 months, while 38% identified the shifting global economic environment and geopolitical disruption. An additional 36% were concerned by the elevated cost of capital, and 23% said climate change and environmental issues were one of their top three ‘disruptive’ priorities.

What may still be helping businesses stay cheerful in the shadow of these threats, is that most feel capable of responding to them swiftly and decisively. A 34% portion of UK CEOs said they were highly responsive and ahead of the curve in addressing the disruptions, while 64% said they are moderately responsive but still need improvement in key areas.

Silvia Rindone, UK&I managing partner for strategy and transactions, commented, “After a challenging few years, it’s encouraging to see a positive shift in sentiment among UK business leaders. This renewed confidence, reflected in our latest survey, will help drive UK CEOs to move from a reactive to proactive deal strategy and capitalise on disruptive forces at play. It’s critical that business leaders maintain an agile and forward-thinking approach to portfolio management to adapt to this new dynamic landscape and ensure they don’t get left behind.”

Showing this shift in more stark detail, 91% said they had paused or cancelled a transaction in the past 12 months, with 32% citing the cost of financing being too high. But looking ahead, 98% of respondents now said they expect to actively pursue transaction initiatives over the next 12 months, of these, 40% said they will be looking at M&A, while 49% would look into at joint ventures or strategic alliances with third parties and 31% at divestments, spin-offs or IPOs.

Rindone added, “The CEO survey results highlight a significant appetite for transactions among UK CEOs, however, while many are eager to engage in deals, the fact that 91% had to pause or cancel transactions due to high financing costs underscores the ongoing challenges of capital availability. This balancing act between opportunity and financial caution will likely shape corporate strategies in the year ahead.”