TLDR:
- UK venture capital investment in the innovation sector bounced back in H2 2023, reaching pre-pandemic levels and showing significant growth in early-stage and series B and C investments.
- Climate tech emerged as the standout sector in 2023, with $6.2 billion raised, and the UK maintained its position as the top tech ecosystem in Europe, surpassing France and Germany in total venture capital investment.
According to analysis from HSBC Innovation Banking and Dealroom, UK venture capital investment in the innovation sector has rebounded and is on an upward trajectory. In H2 2023, venture capital surpassed pre-pandemic levels, reaching nearly $22 billion. The growth in investment was driven by a strong showing in early-stage investing, which filled the startup pipeline, and series B and C investments, which reached 110% of pre-pandemic levels. However, late-stage investment has slowed.
Climate tech emerged as the standout sector in 2023, raising a record-breaking $6.2 billion, representing a 40% year-on-year growth. This sector accounted for 29% of all UK venture capital investment. The top funded segments within climate tech were electric mobility and EV batteries, which raised $2.2 billion and $1.2 billion, respectively. AI also received significant investment in 2023, with $4.5 billion raised, marking a 29% year-on-year increase.
The UK remains the third-largest tech ecosystem in the world and the number one in Europe. It raised more venture capital in 2023 than France and Germany combined and is home to 40% of Europe’s venture capital. London is the preferred European base for international funds. Investment in the UK innovation sector is distributed throughout the country, with the highest growth rates recorded in Birmingham (+1183%), Liverpool (+657%), and Sheffield (+595%). UK startups employ 1.8 million people, representing 300% job growth since 2018.
Looking ahead, UK venture capitalists have an unprecedented amount of “dry powder,” with over $25 billion raised in the past three years, and the country is the center of the European venture market. The UK also has a growing pipeline of potential unicorn startups, with over 63 non-acquired private unicorns. The UK’s private unicorn stable is estimated to be worth $137 billion. Additionally, several successful unicorns have spawned new startups, driven by staff alumni turned founders.
