UK scale-ups face crisis as growth capital hits seven-year low 

Tuesday 06 Might 2025 6:00 am
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Monday 05 Might 2025 3:16 pm

Development capital has hit a seven-year low on each quantity and worth with the UK start-up to scale-up pipeline “damaged”, a contemporary report has warned.

Figures seen by Metropolis AM revealed Collection A funding – investments of £2m to £10m for startups seeking to develop – had slumped to £2.4bn within the 12 months to March 2025. 

This was a £500m drop from £2.9bn in March 2024, and £3bn in 2023, in accordance with a report from funding platform Enterprise Path compiling knowledge from Dealroom and Sifted. 

In 2021 one in 4 startups that raised seed funding – the primary formal funding stage to develop a enterprise – efficiently progressed to the expansion stage of Collection A. 

However the success charge has drastically dropped with just one in 14 now managing to lift progress capital to scale. 

Enterprise Path’s report slammed the funding ladder as “damaged” as simply 82 firms accomplished Collection A funding within the first-quarter of 2025, in comparison with 120 in the identical interval of 2024.

UK dangers changing into ‘nation of micro companies’

Enterprise Path’s Ian Merricks advised Metropolis AM: “If firms can’t progress from start-up to scale-up funding, we turn out to be a nation of micro companies, missing scale.”

“From 5.5m small and medium-sized enterprises, lower than 400 a 12 months are capable of entry first VC funding, and this low quantity is declining. This has severe knock-on results all through the funding cycle”.

The Treasury will publish its inaugural Monetary Companies Development and Competitiveness Technique on July 15, the place it should define its position in fostering progress. 

Merricks stated: “Firms stay under-supported to be investor prepared and to understand how greatest to entry VCs. 

“There are huge discrepancies in who can entry VC funding, particularly for under-represented areas and founders, present Authorities initiatives from Innovate UK and different public finance initiatives will not be working at scale, because the continued decline demonstrates.”

The report additionally revealed Collection B funding – later-stage progress capital – had stalled with flat values of capital invested at £2.3bn.