MBM Commercial’s view on the road ahead

As the economic landscape stabilises, we can see defence, fintech and medtech as the key sectors that will attract significant investment. 30% of deals in 2025 involved AI across a multitude of sectors and we can expect to see more activity on AI throughout the year. With tariffs here to stay, we will see industrials consolidating their positions by investing in companies in their supply chain to try to clear the road ahead.

Continued interest rate cuts will drive increased PE investment activity. Small and mid-market buyouts will also become more attractive as a result of lower valuations, higher growth potential and less competition.

As part of the Mansion House Compact (UK Pensions Initiative), we will start to see more capital available from pension funds to invest in unlisted companies. However, this will take time and for most companies, it will continue to be a challenging market to raise scale-up funding and only the best performers in the right sectors are going to close their deals. For many others, success (and survival) will come from securing deals that require out of the box thinking and navigating a novel route and approach for their journey ahead.

The bursting of an AI bubble could be a real set-back but even with last week’s AI pricing correction (or wobble!) we don’t think 2026 is going to be a repeat of 2022 and the dot-com crash. AI is being adopted at pace and will be a game changer for many businesses. The question is whether you are investing in AI now and can you adapt quickly enough to ensure that you remain competitive and relevant. For many that either do not have the funds to do so or do not have the inclination to make an investment, they may well get left far behind as AI adopting competitors eventually race past them.

At a time when the cost of employing people in the UK has reached an all-time high, AI adoption is the light at the end of the tunnel to help ensure you can do more with fewer people. The introduction of the new employee friendly Employment Rights Act will also pile further pressure and costs onto businesses, who will need to review their policies and procedures to get ready for the changes ahead. Key dates impacting businesses in 2026 are April and October, with further changes in 2027. Suffice to say, businesses will have to prepare for increased worker rights, which, if not managed carefully, could see increasing employment tribunal claims – and with the tribunal courts already dealing with significant backlogs, employers can expect longer case lifecycles. The ability for employees to use tools like AI in their claims process will also increase claims. So watch out for these employee road-blocks and do what you can to swerve past them!

We can also expect more guidance on the complex interplay between intellectual property rights (particularly copyright) and generative AI. The High Court issued its long-awaited judgment towards the end of last year in the case of Getty Images v Stability AI case, which examined how UK IP laws applied to generative AI. The dispute centred on whether Stability AI’s image-generation model was unlawfully trained on Getty’s copyrighted images and whether the AI model itself could be treated as containing infringing copies of those works. The High Court found that the AI model does not store or contain copies of the images, therefore rejecting Getty’s main copyright arguments. This is good news as far as AI adoption is concerned and appears to clear the road ahead, but we can expect to see appeals around this decision.

When it comes to the US economy we can expect to see 2.2% GDP growth, but the Trump administration and its policies create significant uncertainty and risk. American consumer sentiment remains pessimistic due to high prices, affordability issues, and job market concerns and with midterms in 2026, the Republicans will want to drive in a straight line and stay in lane.

When it comes to investment, it is natural for UK companies (especially in tech) to look to the US where there is broader access to capital and bigger VC funds that are typically more willing to take risks. But with the tightening of US immigration regulations and enforcement we can expect it to become harder and more expensive for UK companies to expand into the US and move personnel there, either temporarily or permanently. But while expansion plans for the US may be on pause or moving at a slower pace, ultimately as the biggest market, the US still remains an attractive target market for many companies.

When it comes to US expansion and setting up a US entity, one thing to keep an eye on in 2026 and moving forward is whether Delaware will retain its supremacy as the most widely chosen jurisdiction for US incorporations. Although Delaware is the preeminent US state of incorporation, other states (Texas, Nevada and Oklahoma) are looking to compete with and have begun to adapt their corporate laws and legal and tax systems in order to become the next “incorporation destination”.