British Business Bank’s Small Business Equity Tracker finds AI deals 40% larger on average than deals across UK equity market

UK investment gap with the US driven by sectors such as life sciences and advanced manufacturing 

The UK had a 10% investment gap with the US between 2022-2024 after adjusting for the size of the economy. Looking across sectors the UK is outperforming the US in financial services and clean energy, and is only marginally behind in digital technology. However, there are more acute gaps in life sciences and advanced manufacturing, two of the growth-driving sectors identified for investment as part of the UK’s modern industrial strategy. Between 2022-2024, UK venture capital investment represented 0.68% of GDP, 1.1x less than in the US, though this gap has narrowed from 1.3x in 2019-2021. 

British Business Bank plays critical role backing startups as early-stage venture capital investment declines

The British Business Bank is playing a critical role in start up growth as 48% of its equity deals were at the seed stage and 41% at the venture stage between 2022-2024. These are areas which have seen declines across the wider market, with the number of seed and venture stage deals in the UK falling by 15% and 17% respectively in 2024, similar to the trends seen across the Rest of Europe. The British Business Bank is continuing to support early-stage businesses through these challenging market conditions, underlining its importance to startup businesses.

London’s share of investment falls as Scotland, the North West and East Midlands rise

London has become less dominant over the last few years as its share of equity investment has dropped to 61% from a 2020 peak of 73%. London was also less resilient in 2024 than the wider UK equity market, seeing a 21% drop in the number of equity deals compared to 2023. 

Five of the UK’s 12 Nations and regions saw growth over 2024 with activity in Scotland, the North West and East Midlands increasing across both the number of deals and total investment value. Proportionally, the British Business Bank was more likely to support deals in seven of the 12 Nations and regions compared to the wider market, reflecting the impact of the Bank’s Nations and Regions Investment Funds and Regional Angels Programme.

Business angels vital for early-stage equity investment

Business angels continue to be a significant source of equity investment for start up and early stage businesses with 70% of angels investing in early-stage businesses. The Small Business Equity Tracker found that two-thirds (64%) of respondents to the Bank’s survey of UK angel investors have matched or increased their investments from 2023 to 2024.  

Where angels reported ‘backing underrepresented groups positively impacted investment decisions’, they were most likely to invest in female entrepreneurs followed by entrepreneurs from ethnic minority backgrounds. More than a quarter (26%) of businesses backed by angel investors were led by all-female founders, up from 12% in 2019, further indicating increased focus on female founders.