Huge 20% drop in mergers and acquisitions activity this year: "No break in the storm clouds for small businesses"

THERE has been a huge 20% drop in mergers and acquisitions (M&A) of small businesses this year – with experts fearing that it showcases just how tough the climate for business owners has become.

The first six months of 2025 saw the 20% fall – a drop of nearly £8billion from the same period last year, PWC's latest Global M&A Industry Trends report shows.

Financial experts fear this shows just how difficult Small and Medium-sized Enterprises (SMEs) are finding it.

Mary Maguire, Managing Director at Derby-based Astute Recruitment Ltd, said business owners are now worried about what will happen in Labour's Autumn Budget.

She said: "Speaking to SMEs, not for profits, and charities, the consensus is that the things are very tough out there. To paraphrase a quote by Ryunosuke Satoro, ‘Individually, SMEs are one drop. Together, they are an ocean.’ 

"At the moment - it feels like No 10 is launching wave after wave of hardship against businesses, with no break in the storm clouds, just a very delayed weather forecast at the end of November (aka Autumn Budget)."

Scott Gallacher, Director at Leicester-based Rowley Turton, said growing his business has been tough this year.

He added: “Nearly 30 years on, we’re still growing despite the challenges. We’re working hard despite the pressures thrown at us. Growing a business is tough when higher National Insurance adds to costs and many candidates prefer remote working, while we’d like most of our team in the office most of the time. 

"That said, we’ve recently recruited a practice manager to support our growth and we’re now looking to bring in an apprentice administrator. As we approach our 30th year, we’re determined to keep building for the future.”

Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said Chancellor Rachel Reeves' policies have directly led to SMEs struggling. 

He continued: “It's not rocket science. When the government wanted to cut smoking, what did it do? It increased taxes, and it was a very effective strategy. So, what did Rachel Reeves think was going to happen when she increased taxes on employers in the last budget? 

"The nearly 20% drop in M&A activity and £8bn reduction in deal values is significant and represents part of a concerning trend. The decline was primarily driven by a drop in the number of megadeals in the UK compared with the previous year. According to global M&A industry trends, larger, confidence-driven transactions have been particularly affected. 

"While the UK is not alone in experiencing this downturn, Britain's decline appears steeper than global trends. For UK businesses experiencing this firsthand, the M&A decline reflects what many are seeing: increased caution around major investments, deferred growth plans, and a focus on preserving cash and maintaining flexibility in an uncertain economic environment.”

Rachael Chadwick-Harrison, Managing Director at Chadwick Accountants & Bookkeeping, said business owners are becoming frustrated with the climate in the UK.

She added: “At our firm, we’ve seen a noticeable rise in conversations about company closures – often not due to failure, but lifestyle decisions like moving abroad or stepping back from business amid frustration with the UK climate. We’re also seeing high-earning professionals with small but successful businesses returning to PAYE roles. 

"The driver is uncertainty: clients want stability, pensions and benefits as contracting opportunities shrink. However, it’s not all negative. Our most strategic clients are thriving – taking advice, planning ahead and capitalising on gaps left by retreating competitors. The drop in M&A activity reflects broader caution, but also highlights the value of clear strategy and expert guidance in uncertain times.”

Though Steven Mather, Lawyer & Director at Leicester-based Steven Mather Solicitor, said this drop was not what it seemed.

He said: “This is an artificial drop, because in October 2024, M&A lawyers were the busiest we've been for many years due to the Labour government's first Budget increasing tax on business owners selling. They increased the tax on the first £1million of sales from 10% to 12% and on capital gains tax generally. 

"Since then, small business owners have continued to explore sales of businesses, again, focused on the increasing taxes. Selling after April 2026 will already see what was previously 10% increased to 18% so sellers are looking to exit quickly. 

"In the past six months, my business (which specialises in selling businesses under £10million) has seen a marked increase in activity, and we predict that will continue or increase as we move towards a) the next Budget and then b) to the April 2026 changes already made.”