Two-thirds of CEOs to step up investment in 2022 - survey

Most UK corporates are expecting to accelerate investment and undertake mergers and acquisitions (M&A) this year, a new survey reveals.

The inaugural EY 2022 CEO Outlook Survey revealed that UK CEOs are responding to the immediate challenges thrown up by the pandemic, while taking bold decisions to build long-term value.

It found that appetite for M&A by UK CEOs remains strong, with two-thirds of respondents (66 per cent) expecting to transact in the next 12 months, compared to 59 per cent globally and 57 per cent of executives surveyed last year.

The UK remains the second most attractive inbound destination for deals globally, behind the US, particularly in sectors it has global strengths, including financial services, fintech and high-end consumer and industrials.

The CEO Survey also revealed that UK companies are anticipating a significant amount of private equity (PE) activity, with 45 per cent of UK CEOs expecting strong competition from PE buyers in the deal market, compared with 21 per cent globally.

Dan Salt (pictured), who leads the Midlands-based M&A team in Birmingham, said: “For many companies, M&A remains a fundamental part of how they act on and deliver on their strategic growth plans.

“From rationalising their portfolio, to digital transformations and improving their ESG profiles, companies are using deals to reshape their business at pace.

“Given the intense level of deal activity we 've seen in the last two years, many companies will be integrating recently acquired assets, but UK CEOs are still signalling that they remain strategically poised to buy assets that support their growth ambitions. ”

UK CEO responses indicate that environmental, social and governance (ESG) is now an integral part of corporate strategy, which cuts across every aspect of decision-making.

UK CEOs are giving this topic even sharper attention than their global peers, with 98 per cent of UK CEOs expecting ESG to be an important value driver, compared with 83 per cent globally.

Its strategic importance means seven per cent of UK CEOs have walked away from a deal because they have ESG concerns.

However, investors don 't always share this understanding, 70 per cent of UK respondents admit they have encountered resistance from investors and shareholders about their sustainability transition strategy, of which 42 per cent say their shareholders want them to wait for competitors to act first - in direct contrast with CEO 's strategies to lead their markets.

UK CEOs identified the pandemic as a significant catalyst for corporate transformation - over 90 per cent of UK respondents said that Covid-19 had affected their sector and over a third expected this change to be fundamental.

However, alongside this imperative for change, CEOs are also handling many other strategic challenges, including energy prices, supply chain disruption, and material and labour costs and shortages which became major problems for companies in a matter of months in 2021.

Almost every UK CEO in the survey reported an increase in costs and the need to adjust their supply chain in response to disruption and geopolitical challenges.

As a result, over 88 per cent of companies are altering their supply chains or geographical profile - with over a third of UK CEOs accelerating cross-border investment.

The survey also indicated that over 50 per cent of UK CEOs will be directing capital investment towards their organisation 's growth engines or entirely new ideas in the next five years, demonstrating willingness to make bold moves in the face of change and to look towards a longer horizon.

Digital transformation also remains a key priority with over 50 per cent of UK CEOs using technology as their main strategic driver to improve margins, either through automation or technologies that increase customer engagement to develop new data-driven products and services.