According to new analysis from HSBC Innovation Banking and Dealroom, UK venture capital (VC) investment could be on its way back in 2024, after having turned a corner in the second half of 2023.

Following the sharp global pullback of venture capital in H2 2022, VC being put into the UK has been distinctly growing as of the second half of 2023. Nearly $22 billion, or £17bn~, was raised last year, the third highest total on record.

The growth has been driven by early-stage investing, which has remained active, filling the startup pipeline. Breakout stage investment is also now at 110% of the pre-pandemic level.

All eyes on climate tech — and AI
Climate tech was the UK’s standout sector in 2023, raising an all-time high of $6.2b (£4.8b~) and accounting for 29% of all UK VC investment last year.

Electric mobility and EV batteries were the top funded UK climate tech startup segments, raising $2.2b (£1.7b~) and $1.2b (£944m~) respectively.

The second most attractive sector was artificial intelligence, with startups utilising AI raising $4.5b (£3.5b~) in investment, with the likes of Synesthesia, AutogenAI, and Stability AI gaining significant funding rounds.

The UK’s position remains strong
The UK remains the third top tech ecosystem in the world and the number one tech ecosystem in Europe. Last year, it raised more venture capital than France and Germany combined.

The UK is also at the centre of the European VC market and home to 40% of the continent’s venture capital, while London is the European base of choice for top international funds.

Positively, it’s evident that UK entrepreneurship is distributed throughout the country with investment growing fast in locations such as Birmingham (+1183%), Liverpool (+657%), and Sheffield (+595%). UK startups also employed 1.8 million people, representing 300% job growth since 2018.

Looking ahead to the rest of 2024
Data points to the UK’s VCs having more dry powder than ever before with over $25bn (£19b~) raised in the last three years — plus, leading UK funds are freshly equipped to deploy in 2024.

There’s also a growing exit pipeline with more than 63 non-acquired, private unicorn potential exits from the UK. The UK’s private unicorn stable is worth an estimated $137b (£107b~).

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Speaking on the slew of data and what it all could mean moving forward, Erin Platts, CEO of HSBC Innovation Banking UK, said: “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.”