UK CEOs are increasingly optimistic about the country's economic outlook and are moving from reactive to proactive deal strategies, according to the latest EY CEO Pulse Survey.

The survey, which gathered insights from 100 UK CEOs on capital allocation, investment, and transformation strategies, revealed that over two-thirds (67%) are feeling very or somewhat optimistic about the UK economy over the next 12 months.

Confidence in company performance is also high, with 73% of CEOs expressing optimism about their company’s profitability in the coming year. Additionally, 68% are positive about investing in new areas such as mergers and acquisitions (M&A) and joint ventures, suggesting a proactive shift in strategic planning.

Navigating Industry Disruption

Emerging technologies, including artificial intelligence (AI), are identified as one of the top disruptors, with 45% of respondents viewing them as critical to their industry and markets over the next 12 months.

The shifting global economic environment and geopolitical instability were also flagged by 38% of CEOs as key disruptors, while 36% pointed to the rising cost of capital. Climate change and environmental issues, however, were a lower priority, cited by only 23% of CEOs.

When asked about their ability to respond to these disruptive forces, 34% of CEOs said they were highly responsive and ahead of the curve, while 64% acknowledged that although they were moderately responsive, they still needed to improve in key areas.

The survey also revealed a growing recognition that traditional approaches to portfolio management are no longer sufficient to meet these challenges.

Over a third (35%) of UK CEOs admitted that their portfolio reviews tend to be reactive rather than proactive, and 30% said complacency had led to a lack of aggressive portfolio management. Despite this, more than half (53%) said they assess their portfolio against their core strategy on a quarterly basis, with fewer reviewing it more frequently.

Shifting to Proactive Deal Strategies

Silvia Rindone, UK&I Managing Partner for Strategy and Transactions at EY, said: "After a challenging few years, it’s encouraging to see a positive shift in sentiment among UK business leaders.

"This renewed confidence will drive UK CEOs to move from reactive to proactive deal strategies, helping them capitalise on the disruptive forces at play. Business leaders must stay agile and forward-thinking in their portfolio management to adapt to the new dynamic landscape and ensure they remain competitive."

Strategic Transactions Remain a Priority

Nearly all UK CEOs surveyed (98%) said they plan to pursue transaction initiatives over the next 12 months. Of these, 40% are focused on M&A, 49% are exploring joint ventures or strategic alliances, and 31% are considering divestments, spin-offs, or IPOs. However, 91% of respondents admitted to pausing or cancelling transactions in the past year, with 32% attributing this to high financing costs.

Rindone added: "While UK CEOs show a strong appetite for transactions, the high cost of financing remains a major hurdle. The fact that 91% of CEOs have had to pause or cancel deals underscores the challenges of balancing opportunities with financial caution. This tension between growth ambitions and financial prudence is likely to shape corporate strategies in the coming year."

The EY CEO Pulse Survey reveals that while UK CEOs are growing more confident in the economic outlook and are eager to engage in strategic transactions, they remain cautious of the financial environment.