The volume of British buyouts tumbled 80 per cent in the fourth quarter, as the squeeze on global credit led to the quietest three months in nearly five years, data published today shows.

The value of private equity buyouts plunged to £2.9 billion from £15.4 billion in the third quarter as high-profile deals, such as a proposed acquisition of J Sainsbury, were shelved in the wake of the credit crisis.

It emerged over the weekend that Anglo American had postponed the £3 billion sale of Tarmac, its road-building business, which had been expected to attract private equity and trade buyers.

The figures point to a much quieter time ahead for private equity than was previously expected.

As the credit crisis took hold, banks abruptly curbed lending on bigger deals. Yet the figures from the Centre for Management Buyouts indicate that the middle and lower end of the market has also been hit hard. Tom Lamb, co-head of Barclays Private Equity, which carried out the research with the buyout centre, said: “This has been the quietest single quarter for UK buyouts since 2003, and puts the market back to 1997-98 levels.”

Mr Lamb said: “It could take several years to invest the current generation of funds, compared to the two or three years which has become the norm.

“Buyers are waiting for prices to come down and sellers are . . . waiting for prices to recover. It usually takes about six months for everyone to come to terms with the new cycle and get going again.”

Despite a miserable fourth quarter, 2007 was still a record year for buyouts overall, with £42.2 billion UK transactions, compared to £26.5 billion the previous year. The figures were boosted by the record £11.1 billion buyout of Alliance/Boots by Kohlberg Kravis Roberts and Stefano Pessina.

In the past, private equity has avoided liquidity problems by selling companies to each other, but those so-called secondary buyouts are also feeling the pinch. In 2006, they represented 12 of the top 30 exits, but there was not even one secondary deal in the fourth quarter.

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