Our private capital experts share their insights and industry expertise across the following sectors and themes that will influence private capital activity in 2026:
General market conditions
Private capital – both private equity and private credit – will continue to play a central role in driving market activity in the UK. We believe market conditions and confidence are much improved compared to this time last year with lower interest rates, greater access to capital and the improving performance of the public markets creating a more favourable backdrop for UK private company transactions. However, uncertainty created by the evolving global and political environment in which investors and businesses must now operate will continue to be a significant factor, impacting valuations and contributing to deal execution risk.
Which sectors will see sustained M&A and investment in 2026?
Professional service firms
We expect to see activity in the professional services sector gather pace throughout 2026, driven by firms seeking scale, diversification and resilience in an increasingly competitive market. Peer-to-peer consolidation will continue, particularly among mid-sized firms aiming to broaden their offerings and geographic reach. Cross-border transactions, notably between US and UK firms, are expected to continue as global clients demand seamless service delivery across jurisdictions.
Accountancy sector
Private equity investment will remain a defining feature of the accountancy sector, where recurring revenue models and the prospect of technology-driven efficiencies continue to make firms attractive targets. Those firms who have already taken on private equity funding will likely pursue bolt-on acquisitions to deepen their sector expertise and expand client bases.
Legal sector
While the private equity offering has yet to make meaningful in-roads into the legal sector, the dynamics are shifting. Law firms are under mounting pressure to fund capital-intensive projects, especially in AI and digital transformation. As these investments become critical to competitiveness, some firms will turn to external capital, including private equity, to bridge the gap. Although adoption will be cautious, 2026 could mark the start of a more pronounced trend toward alternative ownership structures in the legal market.
Financial services
The outlook for M&A and consolidation in wealth management continues to be strong. This is largely because of the availability of private capital to acquire and consolidate businesses which deliver sustainable revenues. We do expect more of a ‘flight to quality’ with buyers being more discerning and looking for businesses which have the ability to scale in their own right. We may see a smaller number of larger value transactions taking place over the year.
FCA Consolidation Review
The FCA’s Consolidation Review was published towards the end of 2025. Whilst this indicated areas of specific focus for the regulator, it also recognised the benefit of consolidation in the industry as an opportunity to improve outcomes for both firms and customers. Clear and transparent group structures, prudent use of debt financing and robust integration planning are all hallmarks of successful consolidation which led to more resilient businesses and better client outcomes; conversely these are all areas of specific focus for the regulator and acquirers need to respond to these aspects in deal structuring.
M&A
Commercially, integration remains a key M&A issue, as does ensuring that deal structures reflect the time, costs and complexity of integration. The ‘winners’ will be companies that handle integration more effectively. We have seen some firms pause M&A, to regroup and review what they have acquired, and to put in place strong foundations on which to base further consolidation in future. Larger firms are looking forward to their own exit and what they need to achieve to make this successful. There is also likely to be a focus on organic growth alongside inorganic M&A growth.
We expect to see different deal structures, in particular minority stakes in target businesses; this lowers risk, costs and integration challenges for investors. Tech (and of course AI) will be a feature of M&A, particularly and we anticipate a degree of diversification being reflected in the M&A in the year.
Education
Private capital activity in the UK private school sector continues to show resilience and momentum, despite broader macroeconomic caution and mounting cost pressures on schools. Globally, education is increasingly viewed as a stable, scalable and countercyclical asset class, helping sustain investor appetite for UK opportunities, and private equity firms re-engaged strongly with the sector through 2025, with dealmaking picking up after a quieter 2023–24 period. Factors such as recurring revenues, resilient demand, and sustained global spend on education have underpinned active investment across early years, higher education and workforce learning.
Education therefore remains a standout area where private capital sees opportunities, particularly in high quality assets in strong catchment areas, where sustained demand is most likely, reflecting a growing flight to quality as investors become more selective.
Independent schools
Independent schools remain a major focal point for private capital, and this is expected to intensify in 2026. Investors are drawn to their predictable tuition driven cashflows, asset backed real estate models and sustained global demand for UK educational standards. International expansion remains important for larger UK school brands, offering opportunities to grow revenue outside the UK. At the same time, the fragmented nature of the UK independent schools’ market is accelerating consolidation at an unprecedented pace, with mergers surging sharply and becoming a mainstream strategy rather than a last resort.
School partnerships
Schools are proactively pursuing partnerships to secure long term sustainability amid financial pressures, including rising operational costs and VAT on school fees. Crucially, charitable schools are increasingly creating their own multi school groups through intra charity mergers, allowing them to share governance, centralise leadership, and build resilience across sites.
School closures
Alongside this, an uptick in school closures is creating opportunities for buyers, though investors are targeting only the strongest assets in locations with durable demographic demand, reinforcing a selective, quality driven approach. These consolidation trends include charitable to charitable mergers and acquisitions of single site schools by larger commercial or mixed structure groups, with the result being a rapidly evolving market in which private capital sees meaningful opportunity to build multi school platforms with shared governance, standardised curricula and operational efficiencies.
EdTech
EdTech continues to attract steady investment as hybrid learning models, AI driven tools, digital content solutions and personalised learning platforms mature. Although investors have become more selective after pandemic era valuation corrections, acquisition activity remains consistent, with UK digital learning providers expanding internationally and strategic buyers targeting niche technologies that enhance learning outcomes or administrative efficiency. Collectively, these trends point to a sector undergoing structural modernisation, with private capital, particularly private equity, continuing to drive innovation and growth into 2026.
Sports
Investment in sport
Private capital interest in sport is expected to remain strong through 2026, driven by the increasing sophistication of investment structures across the sector. What was once viewed primarily as a passion-led or reputational investment is now widely recognised as a distinct asset class, combining media, entertainment, infrastructure and brand-led revenue models.
The appetite of equity investors continues to centre on assets with scalable and diversified income streams, including elite clubs, league-level media platforms, stadium and training infrastructure and rights-driven businesses operating across broadcasting, data and digital fan engagement. The growth of women’s sport, the expansion of global media rights and the increasing monetisation of intellectual property and commercial partnerships have all contributed to a broader and more investable universe.
Private credit in sport
Private credit continues to become increasingly prominent in sport, particularly in football, where lenders are attracted by relatively low default rates and high returns. This is evidenced by the continued prominence of private credit providers such as Apollo, Ares, Sixth Street and MSD Capital in European football finance, a trend that is expected to continue in 2026.
Regulation
At the same time, the sector’s regulatory and reputational sensitivity remains a defining feature. Ownership tests, multi-club ownership rules, financial sustainability regimes (such as the new squad cost ratio rule being introduced by the Premier League for the 26/27 season) and safeguarding obligations mean that diligence and structuring are critical to any investment in the sector. Investors are increasingly deploying capital through bespoke vehicles, minority or joint-venture structures, and long-term partnership models that balance control, influence and regulatory compliance.
Looking ahead, we expect private capital to continue targeting high-quality sports assets where governance is robust, commercial rights are clearly defined and long-term value creation can be supported by disciplined investment and professional management. As competition for these assets intensifies, successful investors will be those who combine financial sophistication with a deep understanding of the unique regulatory, cultural and reputational dynamics that shape the sector.
Real estate
The UK real estate sector enters 2026 with greater momentum, bringing opportunities for strategic, smart investment for private capital.
An improved macroeconomic environment, reducing interest rates and better fiscal clarity from the government all combine to offer a more positive outlook in UK real estate for 2026. Savills forecasts investment volumes will rise 10% this year and private capital could be deployed across various asset classes in 2026.
Retail property
Retail is likely to be higher on investors’ shopping lists over the next 12 months. Knight Frank research showed that retail outperformed other conventional asset classes in 2025, with out-of-town shopping centres and food stores achieving particularly good returns. Balanced rental growth, supported by improving occupancy levels and reduced instances of large occupier distress, together with better alignment between pricing and returns, are likely to produce strong investor demand in the coming year.
Nevertheless, the increases in business rates, national insurance contributions and the minimum wage bring challenges for the retail sector which could suppress investor appetite.
Office sector
In the office sector, 2025 saw an upturn with good rental growth and returns sustained by the supply-demand imbalance. Investors tended to focus on amenities and sustainability in order to meet evolving occupier demands post pandemic. This year offers the prospect of a rebound for the sector, with greater competition expected for prime office assets and greater liquidity and potential for secondary stock.
The development and refurbishment of offices continue to be hampered by viability and delays (resulting from planning, net zero and building safety requirements) so prime offices are likely to remain in short supply, boosting values and returns. JLL expects the office sector to attract the greatest share of investment in UK property this year, forecasting that office deals will account for around 35% of all UK real estate transactions next year.
The government’s shock proposal to ban upwards only rent reviews (a fundamental cornerstone of the institutionally acceptable lease) has nevertheless shaken the office investment market.
Industrial and logistics sector
In the industrial and logistics sector, there is growing opportunity for investors to capitalise on demand fuelled by the growth in e‑commerce, AI and data centres, and supply‑chain needs.
Logistics hubs and warehouse facilities have strong occupancy, with investor and occupier demand boosted by low levels of new development. Planning reforms (especially the brownfield focus and default ‘yes’ for development around key transport hubs) is expected to encourage further development and investment.
Hotels, hospitality and leisure
The UK hotels, hospitality and leisure sector enters 2026 with confidence. It was a strong investment year in 2025, with both domestic leisure and steadily recovering international travel providing reliable demand, even though business travel still remains slow with hybrid working and tight corporate budgets.
The sector’s profitability remains under pressure with rising energy costs, business rates, food prices and wages, compounded by labour shortages, especially in regional and leisure destinations. The coming year will bring opportunities for astute investors to work with occupiers to leverage technology to improve sustainability and margins and meet rising user expectations.
Residential property
In the residential market, improved debt pricing and greater clarity about regulatory reforms may drive investor appetite. Investors are increasingly focusing on the living sector and professionally managed rental housing like Build to Rent and Purpose Built Student Accommodation. Trump’s plan to ban investment by institutional investors in US single-family housing may well encourage overseas investors to turn their focus to the UK market.
Residential development still faces challenges with viability concerns, planning and building safety delays and the shortage of skilled construction workers, but the government will need to deliver on the funding and assistance required by the sector if it is going to achieve its ambitious housing target. You can read our series about housebuilding, new towns and placemaking and our article on the regulatory reforms in the residential sector.
Private capital, less constrained by stringent investment committee requirements and return criteria, is likely to be well placed to take advantage of the opportunities that present in the UK real estate market in 2026.
Private credit
The UK and European private credit market is forecast to continue to grow in 2026, driven by the increasing competitiveness of private credit lenders relative to traditional bank lenders, the expectation that non-bank lenders will continue to withstand macroeconomic volatility as well as the ongoing pressure on private credit funds to deploy capital.
Growing role of private wealth
One trend anticipated to extend into 2026 is the rising participation of private wealth in the private credit market, particularly in the form of high-net-worth individuals and family offices direct lending or investing in private credit funds.
This is consistent with investors such as these looking towards the private markets, with the appeal of private credit as an asset class linked to its performance compared to, for example, public equity and debt markets, and its perceived long-term resilience as well as the ability to offer enhanced portfolio diversification.
Product innovation and fund structures
In the case of private credit funds, managers are increasingly offering investment vehicles and tailored investment products, such as evergreen funds with redemption mechanics, specifically targeting private investors.
In addition, private credit fund structures which combine private investors providing junior or equity investment with institutional lenders providing back leverage ranking ahead of them are growing in popularity. These structures allow institutional lenders to benefit from preferential capital treatment (compared to them lending directly into the underlying asset class), whilst private investors are able to benefit from increased leverage, enabling a greater volume of lending.
Regulatory scrutiny
Another trend expected to be prevalent in private credit in 2026 is increased regulatory scrutiny on the sector and calls for transparency, a product of its rapid growth in recent years. This is illustrated by the Bank of England’s announcement in December 2025 of its plan to carry out a stress test of private markets, including private credit, during the course of 2026 to test how they would handle a severe global downturn, with its final report to be published in early 2027.The FCA is also continuing its work on valuation practices and governance in private markets, including private debt, further to its 2025 multi-firm review. This will feed into its current work on the replacement of the EU assimilated law implementing the Alternative Investment Fund Managers Directive. The FCA is also contributing to IOSCO’s review of global valuation standards.
Policy debate and systemic risk considerations
In January 2026 the House of Lords financial services regulation committee published a report following their inquiry into private markets more generally. The committee found generally that there was insufficient data to form a view on whether private markets pose a systemic risk. More specifically, they noted that:
- Banks are increasingly relying on an ‘originate to distribute’ model of lending, in which private credit plays a significant role;
- Private credit had not yet entered the SME finance market; and
- A rise in collateralised loan obligations, which may prove risky.
What other regulatory and legal trends should private capital clients be alert to in 2026?
Technology, AI and cyber security
In relation to generative AI, a series of cases are developing in the ongoing debate between the creative sectors and AI providers. For example, the appeal in the Getty Images v Stability AI case – perhaps the most important copyright case in the English High Court this year – is likely to be heard later in 2026 and there are other equally significant cases before the European national courts, the Court of Justice of the EU and in the US.
Each territory is taking a different approach to the issue of AI training and usage, leading to a patchwork of laws and regulations across the globe that need to be navigated by AI providers. The UK Government continues to assert that it is putting AI at the heart of its plans for economic growth, however it is struggling to balance that desire with its wish to protect the UK’s creative industries. This indecision may have a negative impact on investment in UK tech companies.
UK cybersecurity bill
This new UK Government Bill reflects concerns about very large recent breaches (eg at Jaguar Land Rover) and impacts on supply chains where attacks on outsourced providers are having serious implications for downstream businesses who rely on them. Alongside the new legislation we expect a regulatory push from the Information Commissioner regarding cybersecurity seeking to encourage greater resilience and wielding significant fining powers if failings are identified (as occurred with Capita in 2025).
Digital Omnibus Regulations
In the EU, a pair of Digital Omnibus Regulations’ are proposed to streamline the legal landscape for businesses, with a slight softening of requirements and an extended timeline to comply with the EU AI Act (which is not yet fully in force); and with a series of broadly pro-business amendments proposed for existing EU data, cyber and privacy legislation including the GDPR, the ePrivacy Directive and EU cyber security regulations.
If the Digital Omnibus proposals are all implemented, we would expect private capital investment in the EU to increase as red tape is cut and compliance is made easier for AI developers and other businesses – but in the meantime, it is uncertain how the Omnibus proposals will evolve as they are debated by EU lawmakers, with strong lobbying from privacy campaigners a source of potential change.
Governance
The governance landscape in 2026 will continue to evolve around themes of greater corporate transparency, strengthened risk management and enhanced internal control frameworks.
Companies House reforms and identity verification
The ongoing Companies House reforms will have the most immediate operational impact, particularly following the introduction of mandatory identity verification (IDV) for individual directors and persons with significant control on 18 November 2025. All newly appointed directors must now complete IDV before joining a board, and existing directors are now in the 12‑month transition period to complete IDV ahead of the company’s next confirmation statement. Over the coming months, further updates are expected on the extension of the IDV regime to corporate directors and relevant legal entities, alongside long‑awaited detail on the statutory ban on corporate directors.
The November reforms also abolished most internal statutory registers, with these now maintained centrally at Companies House (save for the register of members, which companies must still keep locally). The Department for Business and Trade (DBT) has confirmed that the requirement for presenters of information at Companies House to complete IDV – or for corporates to file via an Authorised Corporate Service Provider – will not take effect before November 2026, representing a significant delay from the earlier Spring 2026 timeframe. While this reduces immediate pressure to formalise a policy around who can file, businesses will still need to adjust internal processes to ensure Companies House filings are submitted promptly to ensure central registers are accurately maintained.
These developments demonstrate the ECCTA reform package as a whole underscores the government’s continued drive to improve the accuracy, transparency and integrity of information held on central registers.
Virtual AGMs and proposed Companies Act changes
The GC100 has recently published its position on fully virtual AGMs. Although investor expectations still strongly favour physical meetings (there continues to be a decline in hybrid AGMs in the market), proposed legislative changes may pave the way for wholly virtual AGMs. The GC100 guidance confirmed that the government has committed to amend the Companies Act 2006 to clarify that fully virtual meetings are permitted. However, these changes are not expected to override companies’ articles of association which may prompt companies to update their constitutional documents to give them the flexibility to hold virtual‑only meetings in the future.
Review and reform of the corporate reporting framework
In Autumn 2025, DBT and HM Treasury issued a call for evidence inviting businesses of all sizes to comment on regulation considered not ‘fit for purpose’ or a barrier to growth, innovation and investment. The government has confirmed its intention to make the “UK’s reporting regime the most streamlined and proportionate in the world” and will launch a wide‑ranging consultation on the simplification and modernisation of the reporting framework. Proposals could include removing the statutory requirement to produce a directors’ report and exempting certain companies from preparing a strategic report, among other measures aimed at reducing the administrative burden and compliance costs.
The Audit Reform and Corporate Governance Bill
There remains uncertainty surrounding the proposed Audit Reform and Corporate Governance Bill (the Bill), which the government has confirmed will not be introduced during this parliamentary session. In a shift from previous plans to establish the Audit, Reporting and Governance Authority with enhanced powers, the government has announced it will instead look to put the Financial Reporting Council on a statutory footing as “soon as time permits”.
We had also expected a consultation on a major package of audit and corporate governance measures, but the government has decided to prioritise the consultation on corporate reporting and will not consult on audit reform legislation. The absence of a clear timetable on the Bill leaves businesses without certainty on future statutory requirements and this lack of clarity may influence transaction planning and due diligence expectations throughout the year.
UK Corporate Governance Code
For listed companies, the introduction of Provision 29 of the UK Corporate Governance Code (the CGC), requiring boards to report on the operation and effectiveness of their risk and internal control frameworks, will begin to take effect for financial years ending in 2026. While smaller private companies are not directly subject to the CGC, commercial expectations from investors and buyers may drive greater focus on internal controls, with increased pressure on private companies to demonstrate robust policies and risk‑management procedures.
Increased employment regulation
The Employment Rights Act 2025 (ERA), which became law at the end of December, introduces significant new employment protections and obligations. The implications go beyond HR compliance and will affect governance, risk and reputational management, and organisational culture. Employees will gain greater unfair dismissal protection and new day one rights, requiring updated onboarding and probation strategies. Employers also face enhanced duties around harassment and stricter rules on contractual changes, making contract and policy reviews and manager training essential to minimise risk.
Company boards and HR directors will need to assess the strategic impact on their UK based operations and prioritise actions to ensure compliance and minimise the risk of disputes. Our Employment Rights Act insights page explains what is coming, the anticipated timeline and how workplaces can prepare.
In summary
We believe 2026 will be a more confident year for UK private capital and M&A, driven by improved market conditions at a macro level alongside sector specific attractiveness as both international and UK investors and acquirers seek out businesses that can combine an efficient use of technology with robust and scalable business models and strong, motivated management teams.
This article was produced by our private capital group, representing our private capital specialists from across the firm including: Beth Balkham, Christina Tennant, Henry Stevens, Sophie Giblin, Anthony Turner, Andy Peterkin, Nina Caplin, Jane Randell, Alan Baker, Ian De Freitas, Amen Alonge, Jonathan Haley, Amy Wren, Paul Jones, David Copping, Martin Blake and Graham Dunn.
We will revisit these themes through further updates, webinars and in-person private capital focussed events throughout the year, please subscribe here to be added to our circulation list.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, January 2025
