Private Equity to play even bigger role in UK economy as firms plan to increase investment levels in 2026
Over two thirds (70%) of UK private equity (PE) firms plan to increase investment levels in 2026, according to Grant Thornton UK’s latest Private Equity Pulse survey.
The second edition of the Private Equity Pulse 2026 survey 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.
Pete Terry, Head of Private Equity at Grant Thornton UK, said:
“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 £190bn.”
How did PE perform in 2025?
After a subdued start, midmarket PE activity strengthened in the second half of 2025, with H2 deal volumes up 7% and marking the strongest half year since 2022 outside the exceptional 2024 spike. Full year volumes were 7% lower than 2024, though this is expected to narrow as Q4 reporting completes.
Sector activity also shifted toward areas shaped by geopolitics and structural trends, with sectors such as Industrial Supplies and Parts, Aerospace and Defence and Construction and Engineering seeing increased momentum, alongside rising interest in Asset Management.
Over half (58%) of UK PE firms said that fundraising has become more challenging over the last year as LPs become more discerning about where and how they invest after years of elevated rates, illiquid portfolios and slow market exits.
“Would like to meet” – What are Limited Partners looking for in a General Partner?
As LPs double-down on due diligence before investing, GPs are having to market themselves harder. 64% of UK respondents said that LPs are placing greater scrutiny on past success with UK funds, compared to 49% globally. In particular, they are seeking continuity of the people and processes involved in prior success.
Transparency was also seen as key, with 72% of UK respondents saying they will offer increased transparency and reporting in the next twelve months in response to LP demands.
Over a quarter (28%) of UK respondents said that sector specialism would be the most effective way to stand out in the next fundraising cycle. This differentiates private equity funds through proprietary insight, repeatable deal flow, and the increasingly important ability to create a credible track record.
UK firms are betting on digitalisation to create value but also to disrupt traditional models
The research showed that UK PE firms believe tech transformation will drive revenue growth and margin resilience in their assets, with 58% saying it’s a key lever in their value creation strategy. A growing number of funds have teams dedicated to digital, cyber and technology-driven value creation.
One in five (20%) UK respondents named AI-driven deal sourcing as the innovation most likely to disrupt traditional private equity. AI tools can screen thousands of potential deals, flag emerging risks and automate financial and operational analysis, enabling faster and more data-driven decision-making. For PE firms, this accelerates deal flow and improves the quality of insights.
Becoming AI-enabled also requires investment in technology, data integration and specialised talent, raising questions around model bias and over-reliance on algorithmic recommendations. Some 72% of UK respondents agreed that AI adoption in their firm was ‘more hype than impact’, suggesting that the technology’s potential, for PE investors at least, is greater than its current use.
Cash flow plus people will be king
UK private equity is increasingly favouring ‘cash-flow plus people’ operating models, with respondents crowning financial services the sector with the most potential in 2026, followed by technology and professional services.
Financial and professional services have all the ingredients that private equity favours: recurring revenues, high customer retention rates and potential for transformation through technology and professionalisation. 2025 saw some notable deals in these sectors, like the CVC-led acquisition of retail investment platform Hargreaves Lansdown in March and Cinven’s investment into Grant Thornton UK in April.
Continued interest from US funds
A third (33%) of UK PE deals in the first 11 months of 2025 had US investor participation, compared to around a quarter (23%) in 2015. US funds are thinking much more broadly about their global portfolio and are showing greater interest in European assets. This is driven by diversification and sector-specific strategies rather than tariffs or currency shifts. For example, in 2025, Grant Thornton’s specialists supported US pharma and life sciences businesses looking to invest in and benefit from the UK’s strong intellectual property and knowledge base.
Pete Terry comments:
“This interest from US funds is set against a backdrop of unpredictability in US trade policy. Private equity’s response to sweeping US ‘Liberation Day’ tariffs in 2025 was cautious but measured, reflecting the heightened geopolitical uncertainty reshaping global dealmaking. While many UK midmarket portfolio companies have limited direct tariff exposure, the renewed threat of global trade friction has widened valuation gaps and made exits more complex.
"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.”
Michael Moore, Chief Executive of the BVCA said:
“After a year marked by political uncertainty, shifting trade policies and rising costs, private equity has shown just how resilient and adaptable it can be. In 2025 we saw investors lean into long-term opportunities, from energy transition to AI, while maintaining real discipline in a tougher landscape.
"As confidence returns, private equity will play an even bigger role in supporting UK businesses to grow, innovate and navigate volatility."