Key corporate trends for 2025
As we enter 2025, the pace of change in the world of business and politics continues to quicken amid market turbulence and sluggish growth in the UK, a new and returning President in the US and a raft of other challenges both at home and abroad.
But as we look ahead, what are the specific issues facing the corporate world here in the UK and the Midlands?
The deals market
Rachel Reeves’ Autumn Budget impacted businesses in a variety of ways, and as the year progresses, they will be looking to absorb the rising costs brought about by employers’ National Insurance and National Minimum Wage increases.
Another major issue arising from the Budget is the 4 per cent increase in Business Asset Disposal Relief (BADR) coming into force shortly, from 10 per cent to 14 per cent. We expect to see increased activity from owner managers in the Midlands wanting to take advantage of the current rate by disposing of their businesses before the change becomes effective on 6th April.
Meanwhile, private equity continues to receive investment and will be a key player in the market as businesses shift to a portfolio-based approach. Private equity may also be looking to cash-out on the investments made in 2021/22, provided market conditions are favourable.
Overall, we expect moderate growth in M&A activity this year, mainly due to the stabilisation of interest rates and gradually lowering inflation.
The effects of geopolitics
The policies of the incoming President Trump will undoubtedly have a substantial impact on the deals market here in the UK. We could see an increase in cross-border deals with US companies looking to take over British firms and this could be accelerated by April’s BADR changes. We may also see a growth in the number of Middle Eastern buyers looking for UK assets.
Tech and digital transformation
Tech and digital transformation will continue to drive deal activity. There is a need for companies to consider and develop their technological advancements, cyber security and operational capabilities, and this in particular will drive buy-side M&A. The Cyber Security and Resilience Bill will be introduced to Parliament in 2025, and is set to strengthen cyber defence and regulation.
The Economic Crime and Corporate Transparency Act 2023 is now coming into force in stages. Companies House will soon implement a new identity verification regime which aims to improve the quality of data available on existing directors and persons with significant control.
The Midlands is home to many technology hubs. Implementation of AI, healthcare innovation and skills development are all on the rise. There will be plenty of start-ups with brilliant ideas looking for financial backing, as well as larger corporates looking to acquire and work with this new technology.
The Healthcare sector
Another sector we expect to be buoyant in 2025 is healthcare. There will be private and public sector investment although costs are continuously rising, affecting the care home industry, which still has many small to medium-sized players. Consolidators in this space will be active where there is an opportunity to add value. We will also see a continuation in the rise of tech-enabled healthcare in 2025.
Meanwhile the increase in National Insurance Contributions for employers will undoubtedly be a shock for smaller healthcare businesses in the Midlands, and so we expect to see a considerable amount of consolidation within the sector. We could see management buyouts become more popular, as owners will want to exit early. Our specialist healthcare team understand the intricacies of the requirements necessary and can provide a full range of specialist advice.
Conclusion
There will be no let-up in the pace of change in 2025. Many challenges remain from the previous year, but these provide the opportunity to adapt and strengthen our approach in providing high quality services to our clients.
We are focussed on helping clients protect their interests, minimise risks and make the most of opportunities. Please contact Kim Klahn if you have any questions on the topics discussed, or if we can provide your business with any support.
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