From April to June 2023, the US remained the most active inbound investors, completing four deals, consistent with the previous quarter where five deals were completed. The results reflect a similar trend from last year, where the US was also the most active inbound investor in the Midlands for the first half of 2022, with US companies completing 12 deals in the same period last year.  

The research, conducted quarterly by Deloitte in collaboration with Experian Market IQ, tracks inbound and outbound M&A activity between investors and corporates in the Midlands and overseas. From the second quarter of 2023, the results demonstrate consistency with investment into the Midlands from both US and Swedish companies.  

Inbound investment into the Midlands: 

In Q2 2023, the Midlands saw 11 inward deals, a fall of 26 per cent on the last quarter and a 52 per cent decrease year on year. The West Midlands remained consistent with seven transactions completed in both quarters of 2023 so far whilst deal volume fell in the East Midlands with a 50 per cent decrease from eight inward deals completed in Q1 compared to four in the last quarter.  

The information and communication sector was the most popular area for inbound investment with four deals completed in Q2 2023, whereas the manufacturing sector witnessed a drop from seven deals in Q1 2023 to one deal in the last quarter.    

Outbound investment from the Midlands:  

The level of overall outbound deals from the Midlands fell from 15 deals in Q1 2023 to eight deals in the second quarter, marking a 46 per cent decrease. The results represent an overall decrease of 27 per cent year-on-year from the same period in 2022. The East Midlands experienced steady levels of outbound deal activity with five deals completed in the second quarter compared to six in Q1 whereas outbound deal levels dropped more significantly in the West Midlands, falling from nine to three deals completed between Q1 and Q2.  

The financial and insurance sector in the Midlands remained the most popular areas for outbound deals, with three completed in Q2. Consistent with Q1, the US and Ireland remained the most popular regions for outbound investment with four deals completed in each region. The majority of deals completed in Ireland were made up of acquisitions by professional services companies.  

Nick Carr, corporate finance director at Deloitte, said: “These latest results continue to reflect the attractiveness of the Midlands market internationally, particularly to both US and Swedish investors. Despite fewer deal completions in the last quarter, this was not unexpected as a result of various economic issues such as rising inflation and interest rates impacting on deal activity. However, with an ongoing pipeline of deals we expect completions to pick up in the second half of the year. 

“Although deal volume has dipped from the previous quarter, the transactions we have so far advised on are of particularly high value, creating significant economic opportunities for businesses in the region. The recent successful completion of Sygnature Discovery’s acquisition of NuChem Sciences is just one example of the international scale of the deals that the Midlands market continues to be at the heart of.”  

A surprise month-on-month fall in the number of corporate insolvencies in England and Wales does not reflect current tough trading conditions, with the number of struggling businesses in the region likely to rise significantly over the next year.

This is according to the Midlands branch of the UK’s insolvency and restructuring trade body R3 and comes on the back of latest figures published by the Insolvency Service which show that corporate insolvencies decreased by 20.4% in July 2023 to a total of 1,727 compared to June’s total of 2,169, and by 5.7% compared to July 2022’s figure of 1,831.

Despite this, corporate insolvency levels increased by 57.6% compared to July 2021 and by 19.9% against the pre-pandemic figure for July 2019.

R3 Midlands chair Stephen Rome, a director of law firm Thursfields in the region, said: “The fall in corporate insolvency levels is due to fewer businesses entering a Creditors’ Voluntary Liquidation. However, a significant number of directors are still using this process to close down their operations.

“Care needs to be taken that the monthly fall in corporate insolvencies does not send out the wrong message. Numbers are still well above pre-pandemic levels with a raft of economic issues continuing to bite down hard on businesses.

“Costs are rising at a time when people are cutting back on spending, leaving companies facing the challenge of squeezed margins and shrinking revenues and having to work out whether to absorb their cost increases or pass them onto their customers.

“Alongside requests for wage increases are higher energy bills, as the costs of cooling premises in the summer are just as challenging as keeping them warm in the winter. These are making firms more cautious about investment or recruitment – especially as the increased cost of borrowing will make raising funds more challenging.

“As we move towards the end of the summer – a period of time which is traditionally quiet for many companies – we urge directors to be vigilant to the signs of financial distress and act swiftly if any present themselves.

“Cashflow issues, problems paying rent, staff or suppliers, or a piling up of stock can all be red flags for the long-term health of the business. In such instances, directors should seek professional advice as soon as possible. This will give more potential solutions than acting only when problems become more severe.”