UK venture capital bounced back to pre-pandemic levels in 2023

UK venture capital has bounced back in 2023, surpassing pre-pandemic levels and reaching almost nearly $22 billion (£17.21 billion) for the year, according to recent analysis from HSBC Innovation Banking and Dealroom.

The resurgence, fueled by climate technology and active early-stage investments, showcases a positive trajectory for the UK’s innovation economy despite global challenges.

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“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,” emphasised Erin Platts, CEO of HSBC Innovation Banking UK.

Series B and C investments have surged to 110% of pre-pandemic levels, highlighting the vibrancy of the breakout stage.

Climate tech stole the spotlight, securing an unprecedented $6.2 billion (£4.9 billion) in 2023, marking a remarkable 40% year-on-year growth and accounting for 29% of total venture capital investment in the UK.

Electric mobility and EV battery segments within climate technology led the funding charts, securing $2.2 billion (£1.7 billion) and $1.2 billion (£942 million), respectively.

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AI followed closely, attracting $4.5 billion (£3.5 billion) in investments in 2023, with a robust year-on-year increase of 29%, driven by significant funding rounds for generative AI companies.

Furthermore, in 2023, the UK solidified its position as the third-largest global tech ecosystem and was able to maintain its status as the premier tech hub in Europe.

With more venture capital raised in 2023 than France and Germany combined, the UK plays a pivotal role in the European venture market, hosting 40% of the continent’s venture capital.

London stands out as the preferred European base for top international funds.

Entrepreneurial growth is evident in cities like Birmingham (1183% growth), Liverpool (657% growth), and Sheffield (595% growth).

This thriving sector not only drives innovation but also contributes significantly to job creation, with UK startups employing 1.8 million people, reflecting a remarkable 300% job growth since 2018.

Looking ahead, “we are hugely optimistic and excited about the ecosystem in 2024 and look forward to playing our part in fueling this critical part of the UK’s economy,” Platts added.

The UK remains a powerhouse in European venture capital, with 40% of new European venture capital raised in the last five years based in the country.

Furthermore, the UK’s exit pipeline is growing, with over 63 non-acquired private unicorn potentials, estimating an impressive worth of £137 billion (£108 billion).

The founder flywheel is in full swing in the UK, with unicorns like Revolut, Wise, Deliveroo, King, and Babylon leading the way, giving rise to dozens of new startups through staff alumni turned founders.

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