Flint advises international businesses and investors on policy, politics, regulation and competition.
Flint advises international businesses and investors on policy, politics, regulation and competition.
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We expect more political, regulatory, and competition policy scrutiny of private markets, and more policy unpredictability and risk for investors.
The investment landscape in Europe in 2025 will be shaped by the rightwards and populist shift in politics across the globe, disrupting - to varying degrees - a centrist consensus.
Centrist parties are increasingly tacking to populist concerns, albeit selectively (especially on migration), and many populist forces on the right are more sceptical of private capital than traditional right-wing parties.
Geopolitical concerns, especially around national and economic security, will also influence this landscape: trade and investment policies are likely to become more restrictive and thus risk reciprocal action and escalation.
Regardless of government composition, we expect more political, regulatory, and competition policy scrutiny of private markets, especially where Private Equity (PE) is pursuing rapid buy-and-build, introducing new business models (e.g. large chains replacing smaller, locally-owned businesses in healthcare, childcare, and professional services), and working in sectors which had previously been the preserve of the state, e.g. social care.
But this trend is also present in markets such as private credit and infrastructure, where regulators and governments worry about the impact of growth in private financing.
Deal clearance will be subject to greater uncertainty. Competition authorities will be under pressure both to deliver growth and protect markets. For Foreign Direct Investment (FDI), the line between national security and broader national interest will blur. Investors can expect governments to deploy new, innovative tools to intervene in cross-border M&A. Our recent blog provides more detail on this.
But private markets will (sometimes quietly) be encouraged where they can bring much-needed capital, especially in relation to major infrastructure and energy projects, where increasingly fiscally constrained governments will seek more private investment from investors.
Trump’s America First Trade Policy executive order will result in a review of US trade policy and balances, as well as other countries' trade practices. The April deadline gives his administration time to identify priority targets and extract pre-emptive concessions from some countries.
Anti-China measures (on ESG or security grounds) by the EU or US (and by China in retaliation) could increase the cost and decrease the availability of key components and raw materials from China – making the cost of the energy transition more expensive.
The EU’s much-anticipated Competitive Compass will be announced on 29th January. Still, it remains to be seen how well the EU (and its member states) can integrate the plan’s competitiveness and decarbonisation goals successfully and remain competitive with China and the US.
We do not, however, expect existing net zero initiatives across Europe to be substantially changed, though some may be watered down or delayed in some member states in response to fiscal pressures, political realignments, and consumer concerns around the cost of living and inflation.
Trump's demands for greater NATO member spending on defence could cause further fiscal problems for many EU countries, as they will have to cut spending elsewhere (given limited fiscal room).
The Government knows it must restore business confidence following a poorly received Budget and concerns about higher labour costs. Labour is likely to prioritise announcements on supply-side structural reforms like relaxed planning and regulation to attempt to restore confidence.
The Government may be forced to have a Spring fiscal event, given lower growth estimates and increased borrowing costs, despite previously ruling this out. It will likely also be forced into spending cuts, preferring them over further increasing taxes. But given sluggish growth, it may need to do both.
While the Government has indicated greater concern about PE, mainly in relation to children’s services (where regulations on profit caps have been threatened rather than promised), many senior ministers and advisers appreciate the role that private capital plays, especially in relation to tech and infrastructure. But Labour will criticise PE publicly, particularly where it believes PE has benefited from ‘broken markets’ or long-standing public sector problems (e.g. with recruitment and retention of staff, thus driving demand for agencies).
We expect that the final employment legislation package will show signs of greater responsiveness to business concerns, as the brief lies with the Department for Business and Trade - where the ministers are more sympathetic to business, but other departments – such as the Department for Education (e.g. on apprenticeship reform) – are less so.
Any policy changes the government makes in Q1 are unlikely to make business reconsider what surveys indicate will be significant reductions in hiring and capital and discretionary expenditure by business.
The details of a proposed reset of EU relations are yet to emerge but are almost certain to involve discussions to reduce illegal immigration, improve mobility for young people, and enhance market access for UK firms. But this will be politically difficult, and Number 10 is cautious.
The Government will continue to be committed to realising much greater private investment in infrastructure and other real assets, particularly housing, and has already shown political determination in relation to planning permission issues. However, more difficult regulatory change will also be needed to increase the rate and scale of developments.
The UK’s net zero agenda is unlikely to see significant changes (though we may see changes at the margin, e.g. with EVs) due to the determination and profile of the Secretary of State, Ed Miliband (who also benefits from being one of the few ministers with previous extensive experience of government).
Public expenditure, especially procurement, will be under much greater scrutiny. Tech and
tech-enabled providers and programmes will be resilient and thrive – but only if they can demonstrate efficiency savings and tangible public benefits (e.g. reduced waiting times).
The political and operational difficulties associated with national health and care reform mean that the NHS will continue to be reliant on the private sector, while the intractability of waiting lists will continue to drive increases in self-pay and health insurance for primary and secondary care and social/home care.
The centre-right CDU is likely to win the February elections and is committed to excluding the populist right (AFD) from any governing relationships. The CDU leader is pro-European, pro-market, and takes a tougher stance on migration than his predecessors, but may have to compromise on some issues (e.g. temporary labour regulation) to form a coalition with the centre-left SPD.
The Netherlands presents a comparatively stable political, fiscal and economic environment compared to France and Germany (and the UK, in some respects), and despite some anti-PE rhetoric (regarding health and childcare), it welcomes private investment. But more restrictive labour and housing market controls are likely, and the competition regulator is pushing hard for more call-in powers.
The French political situation continues to be very unpredictable since Macron’s failed electoral gamble in July 2024. France remains under close scrutiny by investors and the EU due to deteriorating public finances. Prime Minister François Bayrou recently sought to demonstrate fiscal discipline, but his government’s lack of an outright majority in the National Assembly makes it difficult to pass unpopular cost-cutting measures. If the deadlock continues, snap parliamentary elections are possible from July this year.
A new government is being formed as Fianna Fáil and Fine Gael have agreed on a programme for government, supported by independent TDs. The focus is on childcare, health, and housing, with less clarity on meeting net zero targets following the Green Party's departure from government. The new administration faces the challenge of Trump’s move to withdraw the US from the OECD’s corporate tax agreement. This could significantly impact Ireland’s economic model, which is heavily dependent on US corporate tax receipts.
This blog was written by Directors Martin Summers, James Hill and Joe Jones. Martin co-leads the Flint Funds team, supporting clients to understand and manage political, regulatory and ESG risks and opportunities throughout the deal cycle. James works across all regulated sectors and leads our work with infrastructure investors, advising them on political, policy and regulatory issues. Joe helps private markets understand and address political and regulatory risks and opportunities.