The UK private equity market entered 2026 with cautious optimism. Activity remains selective, with capital focussed on high-quality assets, resilient sectors and businesses with clear value creation plans.

Published: 15 July 2026
Authors: Elizabeth Ward

PitchBook data presented to Shoosmiths in July 2026 reinforces this nuanced picture. The UK remains Europe’s largest private equity market by deal value, with UK PE deal value ahead of France, Germany, the Netherlands and other major European markets in 2026 year-to-date data. However, UK PE activity is pacing 12% lower year-on-year, compared with a 6% decline across Europe and a 20% decline in the US, suggesting that while activity has moderated, the UK remains relatively resilient in a more challenging global environment.

That resilience is also reflected in the broader structure of the UK market. The number of PE-backed companies in the UK has continued to grow, while the number of publicly listed UK companies has declined. PitchBook’s data shows UK PE-backed companies increasing over the last decade, alongside a continuing fall in the number of publicly listed companies. This points to a longer-term shift in the UK corporate landscape: more businesses are remaining private for longer with private capital continuing to play an increasingly important role in funding growth.

Quality over volume

Activity has continued to favour stronger assets. KPMG’s UK private equity outlook points to competition for quality assets, particularly those with recurring and reliable revenue streams, and identifies bolt-ons, exits and operational value creation as key trends for 2026. That mirrors what we are seeing in our own deal activity at Shoosmiths. Sponsors and portfolio companies remain active, but they are prioritising businesses with a clear investment thesis: opportunities to scale, consolidate fragmented markets, deepen capability, access new customers or use technology to improve operating performance.

Buy-and-build remains central

Buy-and-build strategies remain central, with sponsors looking to create value through existing platforms rather than relying solely on new platform investments. Bolt-ons offer a lower risk route to growth, particularly where they support expansion into new geographies, specialist capability, technology or customer bases. PitchBook’s Q1 2026 European PE data points to this trend, with add-ons as a percentage of buyouts rising from 67.4% in 2025 to a decade high of 71.4% in Q1 2026.

Liquidity, exits and realisation strategies

Liquidity and realisation strategies remain a key focus as sponsors face pressure to return capital to investors. With hold periods extending, firms are exploring a wider range of options, including continuation vehicles, minority recapitalisations and refinancing transactions for stronger assets. We are also seeing greater emphasis on exit readiness well before a formal process begins, as buyers and lenders scrutinise whether the investment thesis has been delivered and where further growth remains available.

Sectors: business services, technology and healthcare remain active

One key growth area is B2B deals, with PitchBook's UK sector data showing that B2B transactions represented a significant share of UK private equity deal value in 2026 year-to-date. This mirrors what we are seeing, with professional and business services remaining highly attractive to private equity, particularly where sponsors can pursue consolidation strategies in fragmented markets. We have supported a number of PE-backed accountancy platforms as they continue to pursue strategic acquisitions across the UK and Europe.

Sponsor interest remains strong in software, automation and technology-enabled businesses that support operational efficiency, regulatory compliance and scalable growth, particularly where AI is delivering demonstrable commercial benefits. Compared with 12 months ago, AI, technology infrastructure and data governance feature much more prominently in diligence processes. The strength of a target's digital capabilities and governance framework is increasingly influencing assessments of investment quality, value-creation opportunities and eventual exit readiness.

Healthcare and essential services continue to attract sponsor interest, although regulatory complexity and valuation expectations are prompting a more selective approach. Sponsors remain focused on businesses with resilient demand, specialist expertise and clear opportunities to professionalise operations and support scalable growth.

Cross-border capital remains important

International capital continues to be key. PitchBook data shows that approximately one in three UK PE deals involve a US sponsor, with US investor participation in UK PE deal count reaching around 32% in 2026 year-to-date data. This demonstrates that UK assets continue to attract international capital, particularly where businesses have strong management teams, scalable models and opportunities for growth beyond the UK.

Increased international capital also increases the importance of cross-border execution capability. Transactions involving US or European sponsors often require coordination across multiple jurisdictions, regulatory regimes and adviser groups. That trend is reflected in a number of Shoosmiths' recent transactions, where international investors, overseas targets and multi-jurisdictional workstreams have required coordinated execution across a wide range of legal and regulatory frameworks.

Outlook for H2 2026

The UK remains a deep and attractive private capital market, but investors are continuing to be selective. We expect quality assets to continue to attract capital, particularly in professional and business services, technology, healthcare, education and infrastructure.

Buy-and-build is also likely to continue to feature prominently, especially where platform businesses need to demonstrate growth and operational progress ahead of eventual exit. We also anticipate continued focus on creative structuring, regulatory planning and exit readiness, particularly as sponsors look to return capital to investors after extended hold periods.

The market still has challenges to navigate, including geopolitical uncertainty, higher financing costs, valuation gaps and a tougher IPO environment. Even so, H1 2026 has shown that private equity remains active where the fundamentals are strong: sector focus, disciplined execution and a clear value-creation plan.