AI firms take record 44% share of UK small business funding

AI companies took a record 44% share of UK smaller-business equity investment in 2025, according to the British Business Bank’s 2026 Small Business Equity Tracker. Overall equity investment fell 4% to £12.3 billion in 2025, while larger transactions dominated: the top 10 fundraisings represented 23% of all investment, the highest level since 2020.

The sector accounted for 26% of all deals in 2025, almost double its share in 2022, and AI-related investment rose 48% year on year. Funding was tighter at earlier stages, with seed-stage deals down 27% in 2025 and venture-stage deals down 13%, while growth-stage investment proved more resilient.

University spinouts remained a relative UK strength, with venture capital deal volumes rising 95% in 2021-2025 compared with 2016-2020. Momentum weakened in 2025 as spinout equity deals fell 33% year on year and investment value dropped 51%.

Regional investment broadened outside London, with the North West up 82%, Scotland up 74%, and the South West up 104% in 2025, helped by large AI and energy deals. London’s share slipped from 60% in 2024 to 57% in 2025, while the British Business Bank said it plans to unlock around £26 billion of private capital alongside £13 billion of its own funding over five years.