New analysis has revealed that tens of thousands of new startups could be established at UK universities by 2028, but university leaders warn that the country risks becoming an ‘incubator economy’, with nascent firms being tempted to take their talents and innovations overseas.

The study, from Universities UK (UUK), found a 70% increase in the number of startups founded in the UK between 2014/15 to 2022/23, with more than 64,000 people now employed by these new firms, a 177% increase over the last ten years.

Likewise, figures from the Higher Education Statistics Agency (HESA) show there has been an explosion of startups over the last decade, with more than 4,300 firms registered on average each year and external investment into these startups increasing by almost 350%.

In Scotland, startup tech companies participating in the Scottish Government’s Techscaler business accelerator programme have raised more than £118 million of capital investment in the past two years, with VC investment in Scottish startups reaching £92.3 million in the last quarter of 2024.

According to UUK, with the right support, up to 27,000 new businesses could be established in the UK over the next three years, with a predicted turnover of around £10.8 billion.

However, to see this growth in innovative startups at UK institutions, UUK warns that universities must be sustainably funded, claiming that a lack of funding to help firms scale is heightening the risk of losing them to international competitors and tech hubs such as London.

A recent report from the UK Parliament’s Communications and Digital Committee echoes this concern, highlighting that while the UK boasts a thriving early-stage startup scene – producing more tech unicorns than France, Germany, and Sweden combined – significant barriers to scaling are driving firms to seek growth opportunities elsewhere.

The Committee’s report noted that these challenges have led to the UK risking the loss of fintech giants Revolut and Monzo, which announced they may list in the US rather than the UK stock market.

However, universities are actively working to prevent this from happening, with support coming from over 400 accelerators and 300 incubation hubs in universities across the country.

As well as offering practical support for startups – which can include business mentorships, access to facilities, connections to investors and networking opportunities – three-quarters of UK institutions also offer additional or elective modules in enterprise, which UUK said ensures budding entrepreneurs feel confident in taking businesses out into the world.

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Many startups have also reportedly benefited from funding provided by the Higher Education Innovation Fund (HEIF), which supports the development of knowledge exchange, with recent findings from UKRI revealing that the ROI on this investment is £15.6 for every £1 spent by taxpayers.

The UUK is now calling on the UK Government to make a long-term commitment to this programme, and to support collaborative investment partnerships across the UK, helping universities work with businesses to support growth in emerging clusters.

“We can do more – both to encourage and support new businesses born in our universities, and to ensure that they can remain in the UK and grow here,” said Vivienne Stern, chief executive of Universities UK.

“Universities provide a foundation for economic growth through the knowledge exchange they conduct, and the graduates they educate. Few people know that they also work closely with businesses to help them grow too. 

“Using their kit and equipment, and their expertise, they support start-ups, generate their own spin-out companies, and work with businesses from the wider economy to provide practical assistance to help them grow.”