AI takes record 44% of UK smaller-business equity funding

AI accounted for a record 44% of UK smaller-business equity investment in 2025, according to the British Business Bank, even as overall equity funding fell 4% to £12.3 billion. Capital became more concentrated, with the 10 biggest fundraisings representing 23% of total investment, the highest share since 2020.

AI companies made up 26% of all smaller-business equity deals, almost double their share in 2022, while investment in AI-related deals rose 48% year on year. The trend continued into the first quarter of 2026, when a small number of AI megadeals lifted total investment despite subdued conditions across the broader smaller-business market.

Early-stage companies faced tougher conditions, with seed-stage deals down 27% in 2025 and venture-stage deals down 13%. University spinouts remained a UK strength, with venture capital deal volumes for spinouts rising 95% in 2021-2025 compared with 2016-2020, although spinout equity deals fell 33% in 2025 and investment value dropped 51%.

Regional patterns shifted as the North West, Scotland and the South West posted large gains tied to major AI and energy deals. London remained dominant, but its share of UK equity investment declined to 57% in 2025 from 60% in 2024.