M&A activity is predicted to rise in the coming year as credit improves.

General confidence in the UK markets has dipped this quarter among corporate chief financial officers, but M&A activity is predicted to be on the rise over the coming year as credit conditions improve.

In Deloitte’s latest quarterly survey of 125 CFOs, it was revealed that financial optimism has dipped for the second consecutive quarter amid growing fears of a ‘double dip’ recession.

An emerging theme is a focus on continued expansion coupled with improved efficiency. When asked about their top three priorities, 47 per cent of CFOs selected reducing costs, but 45 per cent included expanding into new markets, and 45 per cent opted for introducing new products and services.

Confidence in the M&A market remains high, as 79 per cent predict UK activity levels will increase, compared to only 1 per cent who expect a decrease over the next 12 months. Fifty-six per cent also predict an increase in private equity acquisitions in the coming year.

The perception of credit availability among CFOs is now at its highest since the Deloitte survey started in the third quarter of 2007, and bank borrowing is regaining its appeal as a source of funding.

Although a previous survey prior to the General Election concluded that deficit reduction should be the new government’s top priority, two thirds of CFOs now expect tighter fiscal policy to have negative effects on their company in the short term.