The majority of UK private equity investors are planning to increase their investment levels during 2026 following a subdued year in 2025. While technology is expected to be the key sector globally this year, UK investors are focusing on areas such as financial services and professional services.
According to the latest Private Equity Pulse from Grant Thornton, the UK private equity market saw a 9 per cent drop in activity to 1,722 deals last year, while the amount spent by private equity investors fell by close to £2 billion to £20.8 billion.
This reflected a year of ongoing economic uncertainty, exacerbated by the upheaval surrounding US government tariffs. Tariff concerns and broader macroeconomic pressures led to a drop in the volume and value of deals with private equity involvement, with 82 per cent of UK investors saying that these factors had prompted them to pause deals.
However, the year ended strongly, with activity up by 5 per cent during the second half of 2025. According to Grant Thornton, H2 2025 was the busiest half-year since early 2022, excluding the 2024 Capital Gains Tax surge.
This has created a sense of optimism among investors that is driving positive sentiment in early 2026. According to the report, 70 per cent of UK investors plan to increase their investment levels during 2026.
Grant Thornton UK’s Head of Private Equity Peter Terry commented: “A strong ability to adapt made 2025 a respectable year for PE dealmaking against a difficult market backdrop, including tariff chaos, will-they-won’t-they Autumn Budget leaks and ongoing geopolitical turbulence. We expect 2026 to be busier as UK private equity funds seek to deploy a stockpile of dry powder, which the British Venture Capital Association (BVCA) estimates at £190 billion.”
During 2026, Grant Thornton found that UK companies expect operational improvements, buyer appetites and stronger valuations to drive successful exits. Digital transformation is also identified as a key factor, with 58 per cent expecting to make upgrades to boost their resilience and performance.
In terms of the sectors that UK investors are focusing on, financial services (34 per cent) and professional services (24 per cent) were among the most popular, demonstrating the confidence that investors have in areas such as fintech, consultancy and banking.
26 per cent of UK investors cited technology as a key sector driving investment opportunities, compared to 30 per cent of global investors. This slight disparity indicates that UK investors are potentially more sceptical about technology than their international counterparts, particularly when it comes to AI.
Regarding the attitude of UK investors, Peter Terry said: “The industry may be divided on AI, with 72% of UK respondents still seeing it as ‘more hype than impact’, but there’s no debate on digital transformation. With 58% placing digital upgrades at the top of their agenda, 2026 will reward those with the strongest digital foundations.”
Of course, there are still a number of adverse factors that could impact private equity investment this year, including buyer caution, economic uncertainty and a range of sector-specific headwinds.
Something that could have a major effect on UK private equity dealmaking this year is what happens on the US market. The report highlights how interconnected UK and US investment is, with approximately 33 per cent of UK private equity deals during the first half of 2025 having some US participation. 10 years earlier in 2015, this stood at just 23 per cent.
According to Grant Thornton, greater US participation in the UK is primarily driven by strategic considerations and sector-specific strategies, rather than currency shifts or tariffs. However, trade friction could impact future activity, with Peter Terry citing the recent threat of additional tariffs on nations resisting President Trump’s Greenland stance as an example.
According to Terry, “these geopolitical flashpoints have added another layer of uncertainty for sponsors, lenders and buyers evaluating cross border deals.”
However, overall, the sentiment at this early stage of 2026 is highly positive, with the strategic priorities of private equity firms and the high levels of unspent capital at their disposal laying the groundwork for stronger investment activity this year.
Find out more about UK M&A trends to watch in 2026
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