The huge appetite for UK companies from foreign buyers slumped during July, August and September, according to official statistics, as the global financial crisis deterred companies from multi-million pound acquisitions.

During the second quarter of the year, foreign companies spent £19 billion on British companies, but by high summer the figure had plunged by 84 per cent to just £2.9 billion.

Spending on acquisitions in Britain by UK companies has also fallen sharply, according to the Office for National Statistics. The number of deals by UK companies fell from 174 to 79, down from a value of £9.3 billion to £3.9 billion.

The official figures include two months of transactions before the banking crisis hit its worst point, when Lehman Brothers went bust mid-way through September.

Mergers and acquisitions worth nearly $90 billion (£51.8 billion) have collapsed since September 1, as turmoil has spread through financial markets, undermining the ability of companies to complete deals.

BHP Billiton's year-long bid for Rio Tinto became the latest merger to fall by the wayside last week.

According to figures published by Dealogic in October, deals worth about $89.5billion have collapsed with no new bidders stepping in. The bulk of these have occurred since Lehman Brothers filed for bankruptcy, unleashing havoc in global financial markets.

The largest number of withdrawn deals were in the property industry, followed by technology and finance, Dealogic said.

However, research by accountants at Grant Thornton, published yesterday, suggests that the onset of the banking crisis in September has not significantly dented mid-market corporates' eagerness for merger and acquisitions activity.

The head of M&A at the firm fears the lack of available finance means that corporate ambition is unrealistic and will go unsated.

Grant Thornton said that while companies were broadly pessimistic about securing finance in the current economic climate with 51 per cent conceding that getting bank finance was "difficult" or "very difficult", many remained unrealistic about their ability to secure finance.

There are companies looking to snap up bargains, particularly in the mid-market.

"Potential buyers undoubtedly believe that the onset of the recession will create distressed opportunities and that the transition to a buyers market will bring valuations down to interesting levels. The speed and depth of the recession will dictate how quickly, or if at all, activity picks up again in 2009," David Brooks, head of M&A at Grant Thornton, said.

"Buyers who are reluctant to overpay are price-chipping but are coming up against sellers who are unwilling to deviate far from the valuation multiples they believed they could achieve in the buoyant 2007 market. The choice for sellers is stark; get realistic on pricing or don't sell," Mr Brooks said.

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