London, February 7:

Foreign companies spent a record amount buying up British businesses last year, official data showed yesterday.

The Office for National Statistics said foreign businesses spent £75.5 billion on 242 deals in the UK, a solid rise of 50 per cent from the previous year and the highest since the UK government began publishing the figures in 1986. The record was hit despite acquisitions slowing in the last quarter.

Deals included the £10 billion takeover of airport operator BAA by the Spanish company Ferrovial and the £4.8 billion buyout of Thames Water by a consortium led by the Australian Bank Macquarie.

“Foreign companies are on a rampant acquisition spree in the UK, mercilessly snapping up prized domestic assets such as Thames Water and [telecommunications firm] O2,” said David Brooks, head of mergers and acquisitions at Grant Thornton corporate finance. “The key driver to these deals is businesses hailing from buoyant economies targeting the UK as a launch pad into Europe.” Brooks said foreign companies were attracted to the UK by its favourable regulatory regime, competitiveness in the global market and lack of protectionist policies. Until recently, borrowing costs had also remained low.

However, with two interest rate rises last year, there were signs in the quarterly data that the boom could be running out of steam. The value of acquisitions by firms abroad from October to December was significantly lower than the peak of £24.2 billion at the start of 2006. Only £13.9 billion was spent in the quarter, down from £18.9 billion in the third quarter and the lowest figure since the third quarter of 2005.

Investment by developing countries rose to £13.7 billion, from £5.4 billion in 2005. Investment from Europe continued to rise steadily, up by £20 billion to £42.2 billion. Takeover activity from the US fell to £7.2 billion.

“We are seeing far less aggressive takeover strategies by US firms who, hampered by a weak dollar, have left the door open for businesses from other countries such as India and China,” said Brooks. “Tata’s recent acquisition of steelmaker Corus being the latest example.”

UK companies, meanwhile, invested £27.7 billion abroad in the year.