Britain is wildly overcentralised but its experimentation with stronger municipal government proves localism can deliver.

Take the case of one ambitious metropolitan mayor from the Labour party who – in the face of huge, well-financed and motivated opposition – introduced vehicle emissions levies and has seen deaths from toxic air pollution fall by an astonishing 40% over five years.

No, not Greater Manchester mayor and prime ministerial heir apparent Andy Burnham. This brave move was made by London’s Sir Sadiq Khan.

Burnham, for his part, caved under pressure – unable to sustain that bold call and abolishing his own “Clean Air Zone” plans. Ducking the difficult decision.

As dealmakers gathered this week for Mergermarket M&A Forum UK 2026 on Tuesday – 10 years to the day since the Brexit referendum – it would be tough to claim that Burnham’s upcoming premiership was classed as either a deal driver or sentiment dampener.

Massive opportunities like EQT’s agreed takeover of TICC blue chip Intertek at an enterprise value of GBP 10.9bn, Castlelake’s approach for no-frills airline easyJet, and Prologis’ cheeky GBP 12.6bn offer for real estate player Segro make up a pipeline of larger, overseas-exposed corporates that will likely deliver bumper deal volumes no matter how much political drama there is in the coming year.

Nonetheless, sustained instability risks gumming up the flow of companies into the lower end of that pipeline – especially in a world where the multitude of software and business services companies that the UK had become rather adept at developing are caught between AI fear and zeal.

Burnham therefore needs a plan for growth that secures capital’s buy-in and safeguards entrepreneurial incentives.

Yet his hitherto hazy approach to fiscal policy ignites concerns he might allow borrowing to soar or potentially hike taxes.

Unsurprisingly, no-one Continental Drift spoke to favoured further increases in UK taxation given those already overseen by Chancellor of the Exchequer Rachel Reeves.

Nonetheless, there was consensus that voter demands for better roads and improved healthcare, alongside strategic imperatives across energy and defence, may push the Burnham administration to reach once again for the begging bowl.

“It’s very challenging” to chart a course to restoring capital spending-starved public services while also boosting the UK’s competitiveness, one private equity partner said at the forum sidelines.

But Burnham has to be careful about capital flight, he cautioned.

Keen to stress he was no ideological soulmate of Reeves, the private equity partner nonetheless said replacing her as chancellor was fraught with risk.

“She is very thoughtful” in engaging with sponsors and listened carefully to concerns from industry bodies, including UK Private Capital (formerly the BVCA), when running the rule over changes to carried interest taxation on taking office in July 2024, he added.

As this column has noted, both Burnham and former Health Secretary Wes Streeting – a favourite to take Reeves’ job – have floated further wealth taxes, with the latter keen to look again at capital gains treatment that would surely touch on the carry settlement reached in the Autumn 2024 Budget.

This would have significant implications for founder and sponsor exit pipelines, with a near-term rush for the door likely followed by a fallow period.

M&A bankers and lawyers at the forum agreed broad-based tax measures would be preferable to narrow fiscal raids that risked high net worth individuals fleeing overseas.

“The way to do it is to put a penny on income tax,” the private equity partner said. Whether that would be sufficient – such a measure would raise roughly GBP 8.2bn annually – is a debate for another time.

But the question of whether a people pleaser like Burnham can make the tough decision to break with Labour’s 2024 election manifesto – which committed to holding income tax rates – to engineer such clean levy increases is one that needs a near-term answer.

Of course, one way to improve the UK’s standing without incurring a major fiscal headache would be to go further and faster towards resetting the relationship with the European Union (EU), as already put in motion under outgoing premier Sir Keir Starmer.

This agenda has major private sector support. Some 52% of UK business leaders back the government focusing on the EU as its top trade priority, with 64% also agreeing that dynamic alignment with new rules in the trading bloc would have a positive effect on the UK economy, according to a survey from the Institute of Directors.

Burnham’s stated personal belief is that UK should eventually rejoin the EU – but that this is an unrealistic prospect in the short-term. He will face increasing pressure to commit to something more concrete than a reset if he calls an early election or dodges the prime ministerial curse of recent years and survives long enough to put a manifesto to the British people in 2029.

And the revolving door at 10 Downing Street has taken its toll. Continental Drift found it oddly dispiriting that delegates were mostly numb and dismissive of the political backdrop, rather than excited or scared by it.

The FTSE 100 and broader stock market indices are stuffed with companies boasting great overseas exposure and capped, sterling-denominated valuations. The UK Takeover Code is consistently applied; the rule of law is respected.

Hollowing out the London Stock Exchange may be bad for Britain, but it’s just fine for M&A advisors.

The question is whether Burnham has the sophistication and guts to take bold action to arrest this decline – ensuring that the pipeline continues to build from the bottom up, with innovative new companies being incorporated, growing and changing hands in the UK. And maybe, eventually, even listing in London.

If he can, that really would be a breath of fresh air.

Continental Drift is a weekly column offering commentary on the macroeconomic, political, and policy forces shaping the M&A landscape across the US and Europe. The opinions expressed here are those of the writer only.