The third quarter of 2024 marked a significant decrease in startup investment in the UK, recording its lowest in five years.
- Venture capital funding for UK startups saw a sharp 50% decline from the previous quarter, with Q3 figures at approximately $2.9 billion.
- Despite the overall drop, the fintech and health tech sectors showed resilience, with fintech raising $3.3 billion and health tech securing second place.
- Overseas investments significantly contributed to UK startups, making up about 70% of the venture capital funding in 2024.
- The UK sustained its position as Europe’s leading startup ecosystem, with total funding surpassing that of Germany and France.
The third quarter of 2024 witnessed a substantial drop in startup funding within the UK, reaching its lowest point in five years. This significant decline in venture capital has made it increasingly challenging for founders to secure new investments, according to a recent report by HSBC Innovation Banking and Dealroom. British startups managed to gather roughly $2.9 billion in venture capital funding, which represents a 50% decrease compared to the previous quarter. Nevertheless, this aligns with the general funding levels observed throughout 2023.
A notable performance was observed in the fintech sector, which, despite a decrease from 2023, remains the UK’s top-funded tech category, securing $3.3 billion. Remus Brett, general partner at LocalGlobe, asserted, “The UK fintech sector is back,” highlighting the sector’s formidable comeback as scaleups challenge traditional market leaders. Significant investments included a major £340 million boost for Monzo in March, later increased to $610 million.
Health tech followed closely, bolstered by a few substantial funding rounds, such as Flo Health’s £156 million Series C and Myricx Bio’s £90 million Series A. These key rounds contributed to the health tech sector accumulating $2.3 billion so far this year. Simon Bumfrey from HSBC Innovation Banking UK noted that both local and international investors are increasingly drawn to the opportunities within the UK innovation ecosystem. Bumfrey added that this interest signals a positive outlook for 2025 and beyond.
Furthermore, the report underscores a robust involvement of foreign investors in the UK, with international funding accounting for approximately 70% of the total venture capital acquired by British startups in 2024. This proportion ranks among the highest in the past decade, only trailing 2019 and 2021.
In terms of overall European performance, the UK continues to lead as the preeminent startup hub, amassing an impressive $12.4 billion in funding to date, starkly exceeding the sums gathered by Germany and France, pegged at $6.7 billion and $6.5 billion, respectively.
Despite the downturn, the persistent interest from both fintech and health tech underlines the UK’s enduring appeal to investors.
