AI businesses received 44% of all equity investment into UK smaller businesses in 2025, the highest share on record.
But that increase came as overall funding fell 4% to £12.3 billion, according to a report by the British Business Bank.
AI-related deals rose by 48% year-on-year, the study said, although these were driven by a handful of “megadeals”
There were weaker funding conditions for smaller businesses overall, with investors putting capital into fewer, larger transactions. The top 10 fundraisings accounted for almost a quarter of all investment, the highest level since 2020.
Early-stage deals at seed and venture level fell 27% and 13% respectively, and for UK university spinouts, deals decreased by 33% and investment value declined by 51%.
Despite this, the UK still had the highest number of venture capital-backed spinouts compared to the US, Germany and France, when controlling for the size of the research base.
Leandros Kalisperas, chief investment officer at British Business Bank, said:
“The concentration of investment into AI highlights both the scale of the opportunity and the challenges within the wider market. Ensuring capital is available across sectors and stages will be critical to maintaining a diverse and competitive pipeline of UK companies.”
The report said London is becoming less dominant in equity investment.
Investment in the North West of England rose 82% in 2025, with growth also in Scotland (74%) and the South West (104%), driven by a small number of large deals in AI and energy.
London’s share of UK equity investment declined from 60% in 2024 to 57% in 2025.
The study also found that the share of equity investment in 2025 going to all female-founded businesses was 2% in 2025 and the proportion of equity deals was 7%, the same as the averages across the last decade. More details here.