Cross-border Transactions Drop on Global Economic Crisis and Political Uncertainty

Cross-border transactions are reeling under the global economic crisis and increased political uncertainty, which top the worry list for top executives across the globe.

According to research cited by global law firm Reed Smith, conducted by the Economic Intelligence Unit (EIU), 53% of senior executives see global economic circumstances as the prime risk factor when doing business internationally.

The publication of the research comes just hours after a separate study showed that the number of cross-border mergers and acquisitions thus far in 2013 is down by almost a third on last year's levels. This is currently the slowest year for M&A activity since 2009 in terms of both international as well as domestic transactions.

The EIU research is based on a survey of more than 450 senior executives from various international businesses worldwide.

According to the EIU report about 37% of the investors interested in China and 45% of those interested in Southeast Asia cited domestic competition as the main reason for slow cross-border transactions.

Furthermore more than half of the executives believe that, given the slow economic recovery, international transactions will be little easier over the next couple of years.

"Over the past five years, the impact of the financial crash has rippled across the world, causing tough economic conditions and also some stern government responses," said Claude Brown, Partner at Reed Smith, who specialises in Business and Finance.

"We are also seeing new political threats emerge, such as the unpredictable 'spot-volatility' in countries like Egypt, Turkey and Brazil which is also making lenders more cautious."

Tamara Box, an expert in structured finance, said that anxiety surrounding the global economy is not surprising, although there are "still very real concerns about the health of the European economy in particular."