The Evolving Landscape of UK Private Equity
As we approach the midpoint of 2025, the UK private equity (PE) industry is facing a fascinating time of contrast: a backdrop of cautious optimism is shadowed by lingering economic uncertainty.
After a quieter year in 2023, deal activity rebounded in 2024, with PE deals in the UK increasing from 229 to 305. As a result, confidence returned to the market, backed by stabilising interest rates and improving macroeconomic conditions. But this momentum has cooled slightly in early 2025.
Q1 2025 saw a 36% decline in UK private equity buyouts compared to the same period last year. This decline bucks the global trend, where deal values rose by 18% in 2024, suggesting UK dealmakers are more risk-averse than their international counterparts. The factors contributing to this include political uncertainty, inflationary pressure, and recent policy shifts such as tariff changes, which have rattled investors.
Still, this slower start may reflect a temporary change rather than a weakness. The fundamentals remain strong, and sectors like Tech, Media, and Telecoms (TMT) are helping to hold down overall market performance.
TMT and Healthcare are on the Rise
TMT continues to lead the charge in UK private equity with deal volumes in this space climbing nearly 19% year-over-year. This is driven by demand for digital infrastructure, cybersecurity, and media content. The UK remains one of the global leaders in tech investment, with many PE firms now doubling down on digital-first assets.
Healthcare, another historically steady sector, also saw a resurgence. After a dip in 2023, healthcare deal value rose by 17.7% in 2024. This reflects renewed confidence in the life sciences and health tech sectors, fuelled by long-term demographic trends and NHS-adjacent innovation.
These sectors not only provide stable growth opportunities, but also serve as a hedge against volatility in more cyclical industries. For private equity investors seeking long-term value, TMT and healthcare are likely to remain core targets.
Exit Challenges and Fundraising Pressures
One of the most notable headwinds for UK PE is the slowdown in exit activity. Exits dropped to a five-year low in 2024, with a clear preference for full exits over partial ones. This has coincided with a rise in secondary transactions, as firms look to offload their assets in a market that is less favourable to IPOs or trade sales.
On the fundraising front, the challenge is even clearer. Globally, Q1 2025 marked the first quarter in over a decade without a single buyout fund raising more than $5 billion. This speaks to a broader investor caution and makes it harder for new funds to break through.
Yet in every challenge lies an opportunity. With less capital chasing deals, UK firms that are able to raise now may benefit from reduced competition and better valuation. For agile funds, the next wave of market consolidation could be highly lucrative.
A Demand for Finance Expertise
As PE firms adapt to this evolving environment, there is growing demand for finance talent – particularly those with transformation, compliance, and risk experience. Both permanent and interim roles are in demand, with a noticeable uptick in hiring for professionals who can drive value creation post-deal.
Skills in areas like IT security, ESG reporting, and operational improvement are also highly sought after. With scrutiny increasing from both regulators and investors, PE-backed businesses need strong finance leaders to head up strategic execution and governance.
Adaptability Is Key
The UK private equity market in 2025 is navigating a complex mix of macroeconomic pressure, opportunity, and investor recalibration. While deal volumes have softened in early 2025, the underlying fundamentals remain strong.
Sectors like TMT and healthcare continue to drive investment, and the slowdown in fundraising could give an edge to those who are well-positioned to deploy their capital. As always, strategic talent acquisition will be key to success. Whether it’s transforming a portfolio company, strengthening governance, or unlocking value through digital innovation, having the right people on your team will make the difference.
If you want to know more about growing your finance team to meet the demands of this market, get in touch with Ewan Fenley ([email protected]) at Harmonic Finance today.
