The South East is the UK's hotspot for mergers and acquisitions in the insurance broking sector while the North of England has the lowest level of deal-making, business expert IMAS consultants has found.
The research examined 300 firms with turnover of between £750,000 and £3 million to assess the level of marketplace reshuffling in the sector. It found takeovers, rather than organic growth, fuelled an 11.5% increase in turnover amongst medium-sized broker firms in 1998.
Oliver Laughton-Scott, director of IMAS, said that pressure on margins was a key consideration in brokers deciding to sell. "One of the interesting results is that the region with the lowest growth enjoyed the highest margins, while the region showing the highest growth had the lowest margins," he said.
Another finding was that larger brokers (those with turnover in excess of £3m) are not nearly as active as their medium-sized competitors in pursuing takeover deals.
IMAS says merger activity will remain strong this year but brokers who fail to invest in technology will not be supported by the market. The report says: "The emergence of the internet…will over time put further pressure on brokers to reduce their transactional costs and consequently staffing levels."
