The United Kingdom stands as a global leader in generating innovative ideas, yet many of its most promising startups are forced to seek funding from abroad to fuel their growth. From January 2022 to May 2026, UK university spinouts secured £6.3 billion in growth-stage funding across 156 rounds. Strikingly, only 8 pence of every pound came from rounds exclusively backed by UK investors.
A July report by Bidwells and Beauhurst revealed that none of the 19 funding rounds exceeding £75 million relied solely on UK capital. This reliance on foreign investment has sparked concerns that the UK is struggling to retain its startups, as many are compelled to look overseas for financial support.
UK Funding Deficit
To tackle this issue, the British Business Bank announced on October 15 a commitment of £180 million to six AI and deeptech venture funds, which collectively raised over £1 billion. This investment aims to bolster UK startups in their early stages. However, the challenge persists in securing sufficient funding to keep these companies within the UK as they expand.
The primary funding gap in the UK typically emerges after the Series A stage, rather than during initial investments. Aviva Investors notes that early-stage funding is relatively well-supported by domestic capital, but the shortfall becomes evident in later growth rounds, where companies require larger investments to scale and remain in the UK.
A Venture Path report highlights the difficulty startups face in progressing from seed to later stages. In 2021, one in four seed-funded startups reached Series A, compared to just one in 14 by 2025. This decline shows the challenges startups encounter in raising the necessary funds to stay in the UK.
Funding Structure
The British Business Bank’s largest investment is £55 million in Intrepid’s inaugural $525 million fund, which falls below the £75 million threshold. The remaining five funds range from £20 million to £35 million, with each complemented by contributions from other investors. Collectively, these six funds have raised over £1 billion.
The funding is strategically distributed across various stages. Approximately £103 million, or 57%, is allocated to funds investing from pre-seed to Series B, addressing both the gap between seed and Series A and later-stage funding needs. The remaining £77 million is directed toward two growth funds, Intrepid and Evantic, where the £75 million funding challenge will be most critically tested.
Leandros Kalisperas, chief investment officer at the British Business Bank, stated, “The UK has no shortage of ideas or talent,” but emphasized that the funding environment has not kept pace with this strength. The Bank aims to ensure more economic value remains in the UK, with the success of this initiative hinging on whether companies in these funds remain UK-based when they reach £75 million rounds.
A consortium of major pension providers, including Railpen, Nest, and several Local Government Pension Scheme pools, has announced plans to explore a UK Scale-up Fund exceeding £1 billion for science and technology companies. The British Business Bank intends to collaborate and invest in this fund, targeting the funding rounds where UK capital has been scarce.
The funding structure introduces a dual challenge: some funds invest globally, while others focus on Europe or the UK. This means the capital is not exclusively reserved for UK companies, and the Bank cannot dictate a company’s location. However, Evantic founder Matt Miller noted that nine of the firm’s non-UK portfolio companies have established London offices, indicating that foreign-led capital can attract companies to the UK as well as draw them away.
The British Business Bank’s £180 million commitment marks the initial phase of a broader strategy. The Bank supports fund managers capable of identifying and backing companies, while pension funds are expected to sustain these companies through larger rounds. The success of this initiative depends on the growth funds’ ability to lead or co-lead rounds above £75 million with UK capital.
