Sentiment about the UK’s short-term economic outlook has collapsed, according to CIL’s latest Investment 360 Index. Among UK dealmakers, 57% are negative on the next 18–24 months and just 13% are positive. This is a sharp reversal from 2024, when only 16% were negative and nearly half (48%) were optimistic.
The downturn is largely driven by dissatisfaction with government policy. The majority of respondents (72%) say that the government is not doing a good job – the weakest score recorded since the Index began nine years ago. Respondents criticise both the absence of a credible growth plan and the government’s tax strategy. Others pointed to repeated U-turns as evidence of weak leadership, with one describing these as “a shambles and hugely damaging to their credibility domestically.”
The Investment 360 Index is based on research with 112 UK market stakeholders, including private equity investors, management teams, corporate finance providers and business advisors, and has been run by CIL, the independent international strategy consultancy, since 2017. The Index provides a comprehensive view of investor sentiment and market conditions.
Long-term sentiment remains positive, albeit at the lowest levels recorded in this research series with 40% positive, 37% neutral and 24% negative. This compares to 59% positive, 30% neutral and 11% negative at the same time last year.
When asked about the investment environment for their own businesses or portfolios, 44% of respondents are positive – down from 54% last year. Many cite pent-up demand after two years of subdued activity, with capital ready to be deployed, and point to valuations beginning to settle – a necessary step for deals to progress.
Longer-term optimism has not yet translated into activity. Current perceptions of M&A remain muted: only a third of respondents rated deal flow as average or high, and the majority still see activity as subdued. Looking ahead, just over half expect deal activity to increase over the next 12 months, down sharply from 2024 when three-quarters predicted improvement
M&A activity remains subdued. Only a third of respondents rate current deal flow as average or high, and most say activity is still muted. Looking ahead, 53% expect deal activity to increase over the next 12 months, compared with 76% who predicted improvement last year. Encouragingly, sentiment is recovering from its lowest point in 2023, with 31% now describing deal activity as high or average compared with 28% a year ago. But the outlook is more tentative, with a larger share expecting stability rather than growth.
Asset quality perceptions are steady. This year 23% of respondents describe current quality as good and 68% as average, broadly unchanged from 2024. Expectations for improvement have softened, however: 38% now anticipate asset quality will rise over the next 12 months, down from 55% last year.
Commenting on the findings of the Investment 360 Index, Alex Marshall, Senior Partner at CIL, said: “This year’s findings reveal a marked deterioration in confidence: pessimism about the long-term economic outlook has reached record levels, dissatisfaction with government policy is at an all-time high, and deal activity remains sluggish.
“While some positives remain – pent-up demand, stable credit markets, and the steadying effect of lower inflation – the prevailing view is one of disappointment. Stability, once again, has failed to materialise.”
