Overview
Whilst globally, 2025 has seen some positive momentum, the UK Private Equity market has struggled to shake off the shackles of inertia of recent years.
Deal activity has remained supressed, with deal volumes falling to 890 in the first three quarters down from 1,097 for the same period last year. Unlike the global landscape, transaction value has also declined, dropping 45.6% to $29.82bn for the year to Q4. Digging a little deeper into the data, we can see that the reduction in M&A activity is the key driver here – a 62.5% drop to only $15.91bn.
The value of funding rounds has fared more favourably, climbing 12% to $13.9bn. Unsurprisingly, fundraising in the UK continues to be muted with capital raised falling by over half year on year from $86.51bn to $41.6bn. With funds holding assets for longer, meaningful performance data becomes more limited at a time where investors are already being very particular with where they deploy their capital.
Driving Factors
The relatively weaker performance of dealmaking in the UK is likely due to a combination of factors:
- The valuation gap is taking longer to narrow, leading to delays in deal progress.
- Nervousness around global macro uncertainty, particularly the impact of tariffs
- UK specific economic factors, the impact of 2024’s budget and the uncertainty of what is to be announced in November’s budget has impeded dealmaker confidence
- A mindset shift to a more patient approach to exits. Whilst LP calls for liquidity are growing, GPs have shown a willingness to bide time, extending hold periods to achieve more optimal results on exits.
Outlook
It is important not to paint too gloomy a picture. Bucking the global trend, UK Private Equity exits have risen in both value and volumes reaching $30.4bn across 214 deals, an increase of 42.5% and 10.3% respectively. There is clearly still strong interest for high quality assets, with the TMT, financial, industrials and healthcare sectors being the most sought after during 2025.
2026 looks set to be an important year for the UK private equity market. There is ground to make up in terms of breaking the deal deadlock but a period of macro stability, innovative deployment of AI and continued democratisation of the market all present strategic opportunities to capitalise on the record levels of dry powder.
