UK venture capital investment has been growing again as of H2 2023

The 2024 could be the year of recovery for the UK according to the new analysis “UK Innovation - 2024 forward look” conducted by HSBC Innovation Banking and Dealroom. This conclusion comes as a result of the growth of venture capital investments in H2 2023 and the return of pre-pandemic levels.

Active early-stage investments as well as breakout stage (series B and C) investments contributed to growth, while late-stage investments significantly slowed.

The UK – the number one tech ecosystem in Europe

With nearly $22 billion raised in 2023, more VC than France and Germany combined, the UK is the number one tech ecosystem in Europe. It is followed by France ($9.2 billion), Germany ($8.2 billion), Sweden ($5.2 billion) and Switzerland ($2.9 billion).

According to the report, 40 percent of all venture capital comes from the UK (in the last five years European VC funds raised $104 billion, out of which $42 billion was raised by UK-based VC funds), making it the the centre of the European venture market.

Besides London, which is already the European base of choice for top international funds, growth has been charted across the country, notably in Birmingham (1183 percent), Liverpool (657 percent) and Sheffield (595 percent).

This also provides broader benefits for the UK jobs market, as UK startups employ 1.8 million people, a figure that represents a 300 percent job growth since 2018.

Climate tech and artificial intelligence

Around 29 percent of all UK VC investment in 2023 ($6.2 billion) went to the climatetech sector. And perhaps for good reason, as the climatetech sector showed a 40 percent growth year over year.

The top funded UK climatetech startup segments include Electric mobility, EV battery and Autonomous mobility, with $2.2 billion, $1.2 billion and $772.9 million raised respectively.

In 2023 AI took an important position in the tech ecosystem. Thus, UK startups utilising AI in one form or another raised $4.5 billion in investment in 2023, including significant rounds for Generative AI companies Synthesia ($90M), AutogenAI ($22.3M & $39.5M) and Stability AI ($50M).

And even more…

The report highlighted the innovative and resilient nature of the UK tech ecosystem, most notably demonstrated via:

• VCs have more dry powder than ever, with over $25 billion raised in the last three years and leading UK funds are freshly equipped to deploy in 2024.
• The UK has produced 168 $1+ billion startups. Additionally, 63 UK unicorns (worth a combined value of $180 billion) have not yet exited.
• There are hundreds of new startups created by unicorns through staff alumni turned founders, demonstrating the full power of the founder flywheel. The ones that are leading the way include Revolut (34), Wise (27), Deliveroo (27), King (19), and Babylon (17).

On the report, HSBC Innovation Banking UK CEO Erin Platts commented:

“This data demonstrates a significant positive trajectory for the UK's innovation economy, despite what has been a challenging period globally.

"We should be proud of the resilience the UK innovation ecosystem has shown and should celebrate its commitment to solving some of our most intractable problems. We are hugely optimistic and excited about the ecosystem in 2024 and look forward to playing our part in fuelling this critical part of the UK’s economy.”