Seed-stage investment outside of London rose by 88% last year in a sign that early-stage startups based in the UK’s regional tech hubs continue to attract crucial capital to get off the ground.
By contrast, seed stage investment in London fell by 22% in 2021 compared to the year prior, according to the British Business Bank’s annual Nations and Regions Tracker.
Overall equity investments increased across the entire UK in 2021 in what was a well-documented record year for tech funding.
London continued to dominate with 1,286 deals worth £11.9bn, representing 66% of investment and 49% of deals in the UK.
However, the report noted that “this was driven by stronger growth in London compared to the rest of the UK, rather than a decline in the other UK nations and regions”.
Equity investment into the net zero sectors grew quicker than the wider UK equity market, the report found.
While UK investment levels remained strong in the first quarter of 2022, the number and overall value of venture capital deals declined in the third quarter.
According to a report by professional services firm KPMG, there were just 575 venture capital deals in the third quarter this year, a level not seen since the same quarter six years ago.
Despite the growth in seed-stage funding outside of London, there remains a large imbalance in terms of overall funding between the capital and the regions.
A recent report by Manchester venture capital firm Praetura Ventures found that if businesses in the North were to receive equal amounts to their London counterparts, the UK’s GDP would increase by £92bn.
Investors outside London that have received support from the government-owned bank include Cheshire’s SFC Capital, Lincolnshire’s Haatch Ventures and Manchester’s TDC.
The British Business Bank report highlighted that the use of external finance had dropped by seven percentage points in the UK this year.
Those wishing to lend in highly deprived areas were found to have a higher chance of being declined.
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