A new report states that the UK now claims Europe’s largest private capital market, representing about a quarter of continental European private equity (PE) deal activity over the past decade. Yet its public markets have struggled, with the London Stock Exchange (LSE) losing ground as a preferred exit route for companies and investors.
The PitchBook analysis explores this imbalance, the drivers behind declining public listings, and whether 2026 signals a meaningful recovery.
Private markets have expanded dramatically while public listings have contracted. PE-backed firms now outnumber listed companies by roughly 2:1, and VC-backed ones by 8.7:1.
Over the past five years, PE-backed company counts grew at a 3.3% compound annual growth rate and VC-backed at 4.7%, even as public listings declined 6.2% annually.
London fell out of the global top 20 IPO venues in late 2025, and the proportion of UK firms listing domestically dropped from 71% in 2019 to 46% in 2025.
High-profile examples like Arm have opted for overseas exchanges.
Take-private deals remain robust, reflecting both opportunistic buying during valuation dips and deeper structural issues.
Activity hit 34 transactions in 2023, followed by £18.1 billion across 24 deals in 2025. Early 2026 has already seen £12.5 billion deployed in the first four months.
US sponsors have been particularly active, capitalizing on valuation gaps that make LSE-listed assets appear undervalued.
Financial services have led by deal value, with notable examples including the take-privates of Hargreaves Lansdown and others.
Exits have increasingly shifted toward sponsor-to-sponsor transactions rather than public markets or corporate sales.
Sponsor acquisitions rose to 62% of the UK PE exit count in 2026 (from 39.2% in 2023) and have represented over half of the exit value since 2024.
This has extended median holding periods for PE-backed companies from five years in 2016 to 7.2 years in 2026, pressuring internal rates of return and delaying returns to limited partners.
Several factors explain the LSE’s diminished appeal. UK-listed firms often trade at discounts to US peers, especially in growth sectors, compounded by thinner liquidity that deters institutions.
FTSE index composition favors traditional sectors like financials and energy over tech, limiting investor flows.
Regulatory hurdles—such as historical track-record requirements, free-float rules, restricted dual-class shares, and compliance burdens—pushed founder-led and high-growth firms elsewhere.
Additional drags include MiFID II’s impact on research coverage, fund closures reducing domestic equity capital (UK pensions now allocate just 4.4% to UK equities, down from over 50% two decades ago), and stamp duty on share purchases.
Signs of revival emerged in 2026. PE exits reached £20.9 billion across 131 deals in the first four months, on pace for a strong year by volume.
Reforms to UK Listing Rules (effective 2024) simplified segments, allowed dual-class structures, and eased requirements.
A three-year stamp duty exemption for new listings, Bank of England rate cuts, and the launch of PISCES—a novel platform for intermittent private share trading—offer various liquidity options without full public burdens.
Early PISCES deals occurred in March 2026.
US market volatility has also made London relatively more appealing for some European firms. The research team at PitchBook has concluded that while challenges persist and public exits have not yet fully rebounded, these developments—combined with pent-up sponsor demand—(arguably) create the most supportive environment for UK capital markets in years.