Every UK business is governed (some might say “shackled”) by an extraordinary array of compulsory financial, industry, employment and data protection regulations.

Failure to meet these stringent obligations has hefty financial and legal ramifications, not to mention often severe reputational damage. It’s of no surprise that the FCA alone imposed £125m worth of fines in 2025.

The past decade has seen an explosion in demand from UK SMEs seeking help in meeting the burgeoning and evermore complex range of compliance standards, including specific solutions for specialist areas such as anti-money laundering, data privacy and risk management. RegTech (regulatory technology) has stepped into the fray to provide SMEs with digital compliance software and apps that help ease the regulatory burden through efficient reporting and better management of all those compliance requirements.

Estimates vary, but various forecasts point to the global RegTech market reaching around $19–33 billion by the end of 2026, with particularly explosive growth in AI-powered RegTech. According to the IMARC Group, meanwhile, the UK RegTech market is expected to grow to $2.4bn by 2033, fuelled by the UK's strong position as a global financial and tech hub. Key trends in the sector include increasing adoption of AI, data analytics, and blockchain that will enhance efficiency, but, as highlighted in my previous article on the cybersecurity market, rising incidents of data thefts, cyber-attacks, and ransomware remain of significant concern within the RegTech market, which itself needs to up its game when it comes to issues of real-time monitoring, fraud detection and identification management.

RegTech is already having an impact on UK businesses. The FCA figure I mentioned earlier (£125m) is actually down 29% on the £176m of 2024. 2026 has already seen a number of major global deals in the sector including TRM Labs (blockchain intelligence and crypto compliance RegTech) raising $70m and heyData raising $16.5M for a platform unifying IT security and regulatory compliance.

It’s not surprising that RegTech businesses have become prime investment targets. For example, international companies, particularly from the US, are targeting UK-based RegTech firms to expand their presence in the European market. Not only are they leveraging the UK's status as a financial hub, they also benefitted from a weaker pound, with larger corporations acquiring smaller outfits and startups to gain access to cutting-edge technologies and to fill gaps in their product offerings.

From our experience in transacting in the software space, however, we find that, although there is a healthy amount of activity, buyers can still be quite cautious in approach and will carefully consider any integration complexities as combining different technology platforms can be challenging, especially in a fast-evolving sectors.

Another factor can be national security concerns in certain situations with increased oversight from competition authorities or government bodies. The UK's regulatory framework, including the National Security and Investment Act (NS&I), has introduced additional layers of scrutiny. Although this has not deterred deal activity, it can be a cause of delay if not identified and acted upon early enough in the process.

Nevertheless, if you are an owner-manager with a business in this space, this remains the ideal to time to buy, sell or fund the growth of your company.

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Rob Starr is a Partner - M&A at Shaw & Co.

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