UK private equity deals dip in 2025 amid market uncertainty

• Private equity deal volumes fell 10% over 2025, but overall values increased.
• Business services remained the most active sector, with professional services and digital consulting driving deal activity.
• Transactions expected to rebound in 2026 driven by increased availability of capital and credit.

Geopolitical tensions, tariff uncertainty and ongoing economic challenges throughout last year meant that total private equity investment activity in 2025 fell back against the previous year, according to the latest UK Private Equity Review from KPMG UK. However, the analysis suggests that this could pave the way for a resurgence of activity in 2026 as private equity investors look to invest high levels of undeployed capital.

The comprehensive annual study into private equity deal activity found that 1,751 deal transactions were completed in 2025, a fall of 10% year on year, while the value of deals, at £176.6 billion, was up 3.5% over the year. While overall volumes recorded for the year were lower than the post covid rebound in 2021 and 2022, they remain significantly higher than the average recorded in the years immediately prior to covid.[i] This suggests that, despite the market challenges, overall private equity engagement continued at a robust pace relative to longer-term trends.

More deals completed in the first half of the year, with 881 transactions in the first six months of 2025, while fewer, larger transactions in the second half saw deal values increase to their highest level since the first half of 2021.

Bolt-ons remained the most common deal type, making up 59% of overall deals, as investors looked to build scale in their existing platforms, however bolt on volumes were 5% lower than their historical average. The volume of buyouts surged to their highest level since 2021 (298 reported deals).

Commenting on the findings, Alex Hartley, Head of Corporate Finance at KPMG UK, said:

“Market and investor confidence continued to suffer setbacks through 2025 as geo-political events created several uncertainties for businesses to navigate, making it a tough year to get deals done. There was plenty of ambition and significant capital to deploy but the bar was set high with a strong focus on businesses and sectors that could trade resiliently in this environment.

“Bolt‑ons continued to be a go‑to way for investors to grow their portfolios, but we did also see a rise in buyouts as investors sought to back new platforms.”

Business services remain a key focus for private equity

Business Services remained the most active sector, accounting for 45% of all UK private equity deals, though volumes declined by around 11% as investors assessed the impact of AI and broader economic uncertainty.

Activity in technology, media and telecoms accounted for around 18% of total deal volume but saw a 24% drop on the previous year. Healthcare also saw a significant fall in deal volumes (28%) while industrials and consumer goods saw notable growth (up 49% and 3% respectively).

Energy and financial services remained comparatively resilient, down 1.5% and 2% respectively, with some significant deals closed throughout the year.

Mid-market deal activity closely tracked the wider market with robust dealmaking continuing in business services and signs of resilience in the energy sector, consumer goods and retail and financial services.

Naveen Sharma, UK Head of Private Equity at KPMG UK added:

“Business Services continues to be one of the busiest areas for UK private equity, especially across professional services and digital consulting. We’ve seen strong interest in firms offering accounting, legal and IT expertise, with investors backing a wave of deals to bring these businesses together under larger groups.

“Financial services also saw a lot of activity, particularly among wealth managers, insurance brokers and investment firms. We expect both sectors to remain active into 2026. Whilst we’re optimistic about the deals environment for 2026, investors are likely to apply greater scrutiny to software businesses as AI continues to reshape operating models, a factor that could act as a headwind for certain sectors.”

Confidence expected to return in 2026

UK private equity activity is expected to pick in 2026, helped by high levels of available capital, more businesses coming to market, and a renewed focus on improving how companies operate.

There is also growing interest in sectors such as defence‑related industries where investors see long‑term growth potential.

Alex Hartley, Head of Corporate Finance at KPMG UK, concludes:

“After some of the difficulties of 2025, we have seen activity start to show signs of recovery in 2026. While there are still challenges to navigate, investors are focused on coming out of the blocks strongly this year as they look to deploy capital and realise some of their investments”