KPMG says share trading is increasing while Lloyds says confidence is increasing

KPMG

UK deals with mid-market private equity investors in the North East of England recorded an increase in the first half of 2023 despite market volatility and difficult trading conditions, according to analysis by KPMG UK.

The firm’s latest mid-market private equity study, which tracks deal flow and sentiment, shows that ten deals worth £1bn were completed in the North East in the first half of 2023, representing a 25 per cent jump in volume and a doubling of Total value corresponds to the same period in 2022.

In terms of the share of deals closed in the region, the Northeast accounted for over 3.1 percent of all deals in the first half of 2023, a slight increase from 2.7 percent in the first half of 2022. The picture also remained largely unchanged elsewhere in the country, with almost half of all mid-market deals (47.4 percent) being completed in the London region.

Nationally, the report found that 327 deals worth £32 billion were completed in the first half of 2023, representing a 12 percent decline in volume compared to the same period in 2022.

However, more clouds loomed for the overall private equity market, with 689 deals worth £70bn completed in the first half of the year, compared to 909 deals in the first half of 2022.

Michael Downes, director of KPMG Corporate Finance in the North East, said: “As the UK struggles with dwindling investor confidence due to inflation, interest rates and geopolitical concerns, the North East has shown particular resilience.” The region recorded gains in the first half of the year bucking the national trend, an increase in private equity deals in the middle market segment.

“In addition to an increase in transaction volumes, the dealmaking sector in the region has effectively strengthened its position in the overall market. There is also a significant increase in the value of the transactions carried out in the medium-sized business segment. This increase is likely due to larger transactions moving into the mid-market category, reflecting broader dynamics in the market.”

Lloyd’s

Business confidence in the North East rose by one point to 44% in August, according to the latest business barometer from Lloyds Bank Commercial Banking.

Businesses in the North East reported higher confidence in their own business prospects month-on-month, up four points to 42%. Businesses in the North East identified developing their offering (39%), investing in their team (33%) and investing in sustainability (26%) as their top growth goals over the next six months.

The Business Barometer, which surveys 1,200 businesses each month, provides early signals about economic trends in the UK both regionally and nationally.

A net 42% of companies in the region expect to increase their headcount next year, up 15 percentage points from the previous month.

Steve Harris, North East regional director at Lloyds Bank Commercial Banking, said: “It is fantastic to see business confidence in the North East increasing, albeit modestly, against a backdrop of high interest rates, sluggish growth and persistent inflation.”

“Innovation continues to be at the top of many companies’ agendas and we have seen this with many of our customers recently, with many putting sustainability at the heart of their future plans. And as the labor market remains tight, it is encouraging that investing in people and skills is a key priority.

“In the short term, companies should think about how they manage some of the key risks, such as interest rates and currency volatility, to ensure they protect and support their future growth.”

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Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “The rebound in economic optimism this month is the standout point. Our analysis shows that companies were relieved that interest rates could peak while also hopeful that anti-inflation measures were having an impact.

“As the trade outlook remains stable and hiring and wage intentions also increase, the macroeconomic environment for small and non-manufacturing businesses is more optimistic.”

“According to the data, large companies and manufacturers are experiencing a degree of caution, likely reflecting the broader global economic environment and, in manufacturing, the shift in spending toward services.”