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UK businesses are increasingly shying away from acquiring Chinese companies, spending only $19 million (£9.5 million) on seven deals in the first half of the year.

This is less than 1% of the sum spent two years ago, when $4.5 billion was splashed out on 15 deals, making the UK the second largest acquirer by value in that period, according to Grant Thornton.

Indeed, the UK was only the 13th largest acquirer by value in H1 of 2007, lagging behind Sweden, Finland and The Philippines, among others.

However, the UK’s declining spend is part of an overall trend of fewer international acquisitions in China. Only $1.9 billion was spent by overseas companies on Chinese businesses in H1 of 2007, compared to $11.5 billion in 2006.

Grant Thornton partner Stephen Weatherseed, head of the firm’s China Group, said that despite an overall slowdown in cross border M&A activity involving China, from a UK perspective the numbers were still disappointing.

“The opportunities on offer in China are immense, but it seems the M&A focus in the UK has drifted away from this rapidly developing nation, possibly due to some of the regulatory difficulties that can hinder initial M&A attempts,” Weatherseed said. “However, many UK companies that have determinedly pursued an acquisition in China are now reaping significant rewards.”

David Brooks, head of M&A at Grant Thornton Corporate Finance, said Chinese authorities should be concerned that the country is no longer flavour of the month in terms of being a takeover target.

“While foreign ownership is not embraced in China, it must be of concern to the Chinese government if decision makers are looking elsewhere for opportunities, as foreign investment levels remain strong and the Chinese economy could be hindered in its development if there is too great a downturn in M&A,” he added.

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