It’s been a tricky two years for the deals market here in the UK and the FT’s recent article really emphasises how frustrated founders are feeling. I review and comment on the quarterly data for KPMG’s Venture Pulse reports (KPMG Private Enterprise quarterly global report on venture capital trends) and honestly, even as a glass half full type of person, it’s been hard to stay positive when looking at the stats. How many times can you say ‘there’s still plenty of dry powder which needs to be deployed, we’re just waiting for this period of uncertainty to pass’ before it starts to sound disingenuous?
The piece also goes on to highlight the rise in US funding year on year as a contract to the decline in UK funding, highlighting a growing transatlantic investment gap. The disparity between UK and US venture investment rates is nothing new, but the widening gap feels worrying. With so much incredible innovation here in the UK, it’s frustrating that it’s so challenging for businesses to raise investment and we’re at danger of losing some of our best innovation and talent overseas.
The data is stark – British start-ups raised £16.2bn in 2024, their lowest total since 2020, while their US counterparts in Silicon Valley secured more than £65bn, a 71% increase year-on-year. Behind these numbers is a deeper concern: the UK’s tech talent is world-class, but its ecosystem isn’t giving founders the confidence to stay and scale.
Despite strong support for early-stage innovation, particularly in AI, fintech, and health tech, growth-stage capital continues to be challenging. And with markets unsettled by new global tariffs, investors are prioritising quick returns. This puts pressure on UK start-ups in IP-heavy sectors, which require longer-term backing but may offer strong upside as conditions improve.
While the UK is a great place to build a product and hire exceptional talent, we have work to do to close this widening transatlantic gap.
So, what can be done? Here are three areas I think could make a real difference:
- Unlock institutional capital.
UK pension funds currently allocate just 5% of assets to private markets, far behind their US peers. That’s a massive untapped pool of money that could be helping to fuel the next generation of global companies. The government has started encouraging pension schemes to invest in high-growth firms and the recent London Growth Plan , developed by the Mayor of London and London Councils as a blueprint for turbocharging productivity in the capital, set aside plans to explore an innovation investment fund, anchored by London’s two Local Government Pension Scheme pools within the next year. - Create a founder-friendly policy environment.
Recent policy changes – including a rise in capital gains tax – are sending the wrong message to entrepreneurs. Founders and investors want to build here, but they also want to know that they’ll be supported. The UK must compete not just on talent but on incentives, clarity, and stability. Otherwise, the smartest minds will go where the conditions are more favourable. - Double down on scale-up support.
We’ve spent years positioning the UK as a great place to start a business – now it’s time to make it a great place to scale one. That means improving access to later-stage funding, strengthening industry-academia links, and putting policies in place that encourage companies to keep their HQ, IP, and operations in the UK long-term.
The irony is that our partial success is now part of the problem. We’ve built an ecosystem that’s strong enough to attract global investors – but not strong enough to keep our own founders here. If we want to retain the economic value of our innovation, we need to act fast and decisively.
Britain has the brains, the builders, and the breakthroughs. What we need now is bold policy and real capital to match.
