Nearly 84% of private capital firms expect to increase or maintain their investment in UK businesses over the next five years, despite growing pessimism about the country’s economic outlook.
A new survey by UK Private Capital, the trade association, found that this figure is broadly in line with the 85% recorded in February. However, confidence in the wider economy has weakened, with 41% of industry leaders now pessimistic about the UK’s economic outlook over the next five years.
In September, 35% of respondents rated the UK as either “excellent” or “good”, down from 50% in February. Meanwhile, the proportion rating it as “poor” or “very poor” rose from 12% to 26%.
Despite the more cautious outlook, firms planning to increase their UK investment pointed to the strength of the country’s life sciences and technology sectors, its skilled workforce, professional services and universities as key reasons for doing so.
Those expecting to invest less cited increases to capital gains tax and carried interest, as well as the growing competitiveness of other jurisdictions. Geopolitical headwinds and the wider tax burden were also among the concerns raised by respondents with a negative view of the economy.
The findings come as the industry has £207bn in committed but uninvested capital, or “dry powder”, available as of the end of 2025. UK Private Capital expects this capital to be deployed over the next three to five years, with historical trends suggesting around half will be invested domestically.
Technology, defence and life sciences are expected to be among the key investment priorities. Digital technology was highlighted by 84% of respondents as a sector expected to play a central role in the next investment cycle, including areas such as artificial intelligence, quantum computing and software. Defence and dual-use technology was identified by 61% of respondents, while 59% highlighted life sciences.
UK Private Capital is calling on the government to use the upcoming Budget to strengthen the UK’s competitiveness and attractiveness to investors. The association is urging the chancellor to provide greater stability across the tax system, including avoiding further changes to capital gains tax and carried interest.
It is also calling for continued regulatory reform, including reviews of the Alternative Investment Fund Managers regime, regulatory reporting, remuneration and prudential requirements. Additionally, UK Private Capital wants the government to strengthen growth finance by modernising EIS and VCT rules and introducing a Scale-up Reinvestment Relief. The measure would encourage founders and investors to recycle capital into UK scale-ups and R&D-intensive businesses.
The association is also calling for measures to increase pension fund investment in UK venture and growth capital. It wants to strengthen the role of the British Business Bank in regional investment ecosystems and back initiatives including the British Growth Partnership and UK Scale-Up Fund.
Michael Moore, chief executive of UK Private Capital, said: "The private capital industry remains committed to backing UK businesses, with most firms expecting to maintain or increase their investment in the UK over the next five years. This reflects continued confidence in the long-term strengths of the UK as a place to build a business and the innovative companies driving growth across the country.
“At the same time, firms are clearly becoming more cautious about the wider economic outlook. We therefore welcome the chancellor’s ambition to see more wealth creation and business profit to drive growth across the UK. Our industry can help deliver that growth, but to do so, the upcoming Budget must provide stability on taxation and a focus on making the UK more competitive, so capital continues to be raised, managed and invested in the UK.”
