Investors plan to increase their investment levels in 2026

2025 saw levels of private equity subdued to their lowest value in five years, according to a new report. However, according to Grant Thornton, the new year presents fresh opportunities, with more than two thirds of private equity players now planning to increase their investment levels.

As 2025 approached, M&A experts seemed geared up for a bumper year. After a dramatic slowing of the market, and sustained political uncertainty in the UK, a definitive election result and the clarity it brough domestically saw confidence rise among M&A professionals. And with Europe-wide IPO momentum resulting in a spike in funding, coinciding with surveys showing more than two-thirds of mid-market business owners in Britain were considering exiting their firm, the future of the deals market seemed relatively bright.

The year commenced with a bang, but not the one which many people anticipated. With the chaos of the US government’s ‘Liberation Day’ tariffs, private equity firms suddenly saw their enthusiasm cool – leading to a sudden drop in both volume and value of deals they participated in. Neither level fully recovered throughout the year.

As a result UK private equity deals fell by 9% year on year, to 1,722, according to research from Grant Thornton. Meanwhile the amount spent by private equity investors dropped by just under £2 billion, to a combined value of £20.8 billion. Despite this performance, however, the analysts believe better times may still be on the horizon.

The close to the year was strong; activity rose by 5% in the second half of the year, compared to the first six months. According to Grant Thornton, this marked the busiest half-year since early 2022, excluding the 2024 Capital Gains Tax surge.

On this basis, Pete Terry, head of private equity at Grant Thornton UK, deduced, “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.” 

The extent to which this manifests may also hinge on what happens with the US market, however, suggesting things are far from cut and dry. Around 33% of UK private equity deals in the first 11 months of 2025 had US investor participation, compared to 23% in 2015. US funds are thinking much more broadly about their global portfolio and are showing greater interest in European assets. However, while this is driven by diversification and sector-specific strategies rather than tariffs or currency shifts, the renewed threat of global trade friction has widened valuation gaps, and made future exits more complex.

Terry added, “This has been further unsettled by escalating tensions over Greenland, with Washington threatening additional tariffs on nations resisting its stance. As Europe prepares potential retaliatory measures, these geopolitical flashpoints have added another layer of uncertainty for sponsors, lenders and buyers evaluating cross border deals.”

Differing priorities

That is not the only area where there is still room for conflict, though. 2026 edition of the ‘Private Equity Pulse’ is based upon responses from 550 global PE leaders, lifting the lid on what general partners (GPs) are really thinking and exploring their expectations for the year ahead. The results show that private equity firms are focusing on execution, adapting to new demands from limited partners (LPs), exploring new fund structures and sharpening sector specialisms. 

To that end, operational improvements in portfolios drove the most demand last year in the UK – noted by 36% of respondents, compared to just 20% in the rest of the world. Looking ahead, this may be why attitudes to technology vary so drastically between samples.

A 72% majority of UK respondents see the technology as ‘more hype than impact’, and just 26% of private equity firms there said they expected the tech sector to provide the most important opportunities, compared to more than 30% globally. Instead, UK respondents have much higher expectations of financial services – at 34%, compared to the global average of just under 29%.