In an overall more challenging market environment, refinancing activity in H1 2026 continued to account for a meaningful share of market volumes, while M&A activity improved through Q2 as broader credit markets stabilised. As sponsors re-engaged with execution processes and with deal pipelines continuing to build, we believe the market is well positioned for a more active second half.
In our Mid-Year Review, we explore what this environment meant for European private credit, including:
Direct lending spreads, leverage trends and deal activity in H1
Pricing was more volatile in H1 2026. Spreads compressed modestly but retained a meaningful premium to public markets: mid-market single B direct lending loans priced roughly 250 to 290 basis points above comparable broadly syndicated single B loans. Leverage normalised to approximately 4.5x, down from a peak of around 5.0x in mid-2025 and broadly in line with historical averages, a sign of continued discipline through a volatile period.
A sector spotlight on IT Services and why we believe AI sharpens rather than weakens the investment case
IT Services remains one of Pemberton’s most active sectors. Worldwide IT spending is forecast to reach $6.31tn in 2026, up 13.5% year on year, with information security spend growing an estimated 12.5%.[1] We see AI shifting the sector away from labour-based delivery toward platform, automation and outcome-based models. That creates near-term risk for commoditised, effort-based work, but a multi-year tailwind for providers with recurring, platform or IP-differentiated models. In our view, AI sharpens rather than weakens the investment case for well-selected IT Services exposure, and every new deal in the sector goes through extensive AI due diligence.
A regional deep-dive on the UK
The UK was the fastest-growing G7 economy in Q1 2026[2], and remains Europe’s largest and most mature private credit market, with 157 sponsor-backed unitranche financings in the 12 months to March 2026, ahead of France (108) and Germany (85).[3] UK deal volumes fell 56% quarter on quarter in Q1 2026 amid Iran-related oil-market volatility and AI-disruption concerns in tech and services, but activity has since recovered: Pemberton’s UK deal introductions reached their highest level since September 2025 in June 2026. Pemberton has remained highly active in the UK, deploying capital across seven transactions, including three new platform investments.[4]
Read our full analysis below.
Download Mid-Year Review 2026
[1] Gartner Market Databook, 1Q26, April 2026.
[2] UK Parliament, GDP International Comparisons: Economic Indicators, 12 June 2026.
[3] Houlihan Lokey, MidCapMonitor, Q1 2026.
[4] Pemberton internal data as of 30 June 2026. Past deployment is not a guarantee of future performance.
