Key Takeaways
- • UK private equity deal volume declined 9% year-on-year in 2025 to 1,722 transactions, with total investment value dropping by nearly £2 billion to £20.8 billion, marking the lowest PE activity in five years, according to Grant Thornton research.
- • More than two-thirds of private equity players plan to increase investment levels in 2026, signaling renewed confidence after 2025's subdued market performance driven by US tariff uncertainty.
- • H2 2025 activity rebounded 5% compared to H1, representing the busiest half-year period since early 2022 (excluding the 2024 CGT surge), indicating momentum entering the new year.
- • Grant Thornton identifies fresh opportunities ahead, with UK private equity positioning to deploy substantial dry powder reserves as market conditions stabilize, supported by improving macroeconomic clarity and reduced political uncertainty following the UK election.
Summary
2025 proved to be a challenging year for UK private equity, delivering its weakest performance in five years. Deal volume contracted 9% year-on-year to 1,722 transactions, while aggregate investment spending fell by just under £2 billion to £20.8 billion, according to research from Grant Thornton. The underperformance stands in stark contrast to expectations formed in early 2025, when M&A professionals anticipated a recovery driven by post-election clarity in the UK and Europe-wide IPO momentum that coincided with strong exit intentions among mid-market business owners.
The sharp deterioration stemmed from the introduction of US "Liberation Day" tariffs, which triggered an immediate cooling of enthusiasm among private equity firms and precipitated a sudden decline in both deal volume and value. Neither metric recovered meaningfully throughout the year despite these headwinds. However, the closing months of 2025 delivered a notable inflection point: H2 activity surged 5% compared to H1, marking the busiest half-year period since early 2022 (excluding the 2024 Capital Gains Tax-driven spike), according to Grant Thornton.
This momentum has translated into renewed confidence heading into 2026. More than two-thirds of private equity players now plan to increase their investment levels in the coming year, signaling conviction that the market has stabilized. Grant Thornton analysts identify this environment as presenting fresh opportunities, particularly as UK private equity funds seek to deploy accumulated dry powder reserves. The combination of improved macroeconomic visibility, reduced political uncertainty, and strong exit appetite among mid-market business owners positions the market for potential acceleration in 2026, contingent on sustained tariff stability and broader economic conditions.
The sharp deterioration stemmed from the introduction of US "Liberation Day" tariffs, which triggered an immediate cooling of enthusiasm among private equity firms and precipitated a sudden decline in both deal volume and value. Neither metric recovered meaningfully throughout the year despite these headwinds. However, the closing months of 2025 delivered a notable inflection point: H2 activity surged 5% compared to H1, marking the busiest half-year period since early 2022 (excluding the 2024 Capital Gains Tax-driven spike), according to Grant Thornton.
This momentum has translated into renewed confidence heading into 2026. More than two-thirds of private equity players now plan to increase their investment levels in the coming year, signaling conviction that the market has stabilized. Grant Thornton analysts identify this environment as presenting fresh opportunities, particularly as UK private equity funds seek to deploy accumulated dry powder reserves. The combination of improved macroeconomic visibility, reduced political uncertainty, and strong exit appetite among mid-market business owners positions the market for potential acceleration in 2026, contingent on sustained tariff stability and broader economic conditions.
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