Venture Capital in the UK – 2025

The British Private Equity & Venture Capital Association’s (BVCA) ‘Venture Capital in the UK’ 2025 report offers a timely snapshot of the venture ecosystem in the UK. The data suggests a resilient early-stage environment and a growing depth of sectoral expertise, particularly in AI and deeptech. But equally, it presents a familiar structural challenge: many UK businesses continue to face friction when attempting to raise meaningful scale-up capital domestically. 

Headline trends: growth in early-stage investment

Venture capital investment in the UK totalled £9 billion in 2024, a 12.5% increase compared to the previous year, solidifying the UK’s position as Europe’s most active VC market and third globally, behind only the US and China. More than 9,100 businesses were supported by venture capital across the UK, indicating a widespread and maturing early-stage ecosystem.

Seed-stage businesses in particular saw significant tailwinds. Investment into seed deals increased by more than 80% year-on-year, while the number of companies securing seed funding rose 30%. These are promising indicators for UK innovation, especially when paired with the broader growth in fund formation – 48 funds were raised in 2024, up from 44 in the previous year.

This early-stage strength is underpinned by a strong infrastructure of R&D incentives, university spinout platforms, and an increasingly diverse pool of micro and mid-sized VC funds. The British Business Bank (BBB), alongside sector-focused LPs and corporate investors, continues to play a key role in catalysing first cheques.

The scale-up gap persists

While the early-stage environment is thriving, the transition from Series A to later-stage growth remains a challenge for many UK companies. As the BVCA report notes, domestic capital becomes significantly harder to access once companies begin raising £20 million+ growth rounds. In many cases, founders overly rely on overseas investors, particularly US investors, for the next stage of funding. The need to access capital abroad has even led to companies redomiciling to the US, a tangible consequence of the UK’s underdeveloped scale-up capital pool.

Addressing this funding imbalance is critical. Not just to retain ownership and talent in the UK, but to ensure companies can access the long-term support needed to scale sustainably. Without a deep pool of domestic growth capital, the UK risks becoming a launchpad, rather than a home for high-growth businesses.

Deeptech and dual-use: maturing sectors, long-term needs

One of the strongest narratives in the BVCA report is the rise of UK deeptech. In 2024, deeptech investment in the UK reached $4.2 billion, more than any other European country. London alone attracted $2.5 billion, while academic hubs such as Oxford, Cambridge, Bristol and Edinburgh continue to be significant regional and national investments hubs, with Oxford and Cambridge Universities ranked first and third respectively for creating the most spinout value in Europe.

These companies, often operating in fields such as AI, quantum computing, robotics and advanced materials, require long-horizon, patient capital. They also tend to sit at the intersection of commercial innovation and strategic national interest, particularly in areas with dual-use (civilian and defence) applications.

It is notable that the Government is responding to this opportunity. The new £400 million Defence Innovation Fund, along with calls to expand the remit and capital of the National Security Strategic Investment Fund (NSSIF), reflect a policy shift towards supporting frontier technologies. If matched by private capital and regulatory clarity, this could mark the beginning of a deeptech strategy with closer coordination between government and industry in the UK.

What can unlock the next phase of growth?

The BVCA report sets out several recommendations to strengthen the UK venture ecosystem, particularly at the growth and scale-up stages:

• Unlocking pension investment: Despite strong returns, UK pensions remain underexposed to venture and growth capital. The proposed New Opportunities for Venture and growth Acceleration (NOVA) accreditation scheme aims to mirror France’s successful Tibi initiative by creating a curated list of funds for institutional investment.

• Expanding the BBB’s remit: Currently focused on early-stage capital, the BBB could be enabled to support larger growth funds and act as a cornerstone LP in later-stage vehicles.

• Reforming tax and regulatory regimes: Updates to SEIS/EIS thresholds, R&D relief, and the Registered Venture Capital (RVECA) regime would improve the UK’s global competitiveness and encourage broader LP participation.

• Support for emerging managers: Greater support for first and second-time fund managers could enhance diversity in both fund strategy and founder backing, addressing the concentration of capital among a few established players.

How Burges Salmon can help

At Burges Salmon, we advise clients across the venture capital lifecycle – from initial formation and early-stage investment through to growth funding, M&A and exit. Our work spans the full range of stakeholders, including founders, VCs, institutional LPs, and corporate investors.

We also recognise that many growth-stage deals now involve international parties. Through our preferred firm network, we work seamlessly with leading independent law firms in the US, Europe and other key venture jurisdictions to deliver coordinated, cross-border advice.

As the UK venture ecosystem continues to evolve, we are proud to support the legal frameworks that enable innovation, growth, and long-term success

For more information about the UK VC market, please contact Alex Lloyd or Shaaf Alam.