AI firms take record 44% of UK small-business funding

TL;DR:

• AI companies took a record 44% of UK smaller-business equity investment in 2025, according to the British Business Bank’s Small Business Equity Tracker.
• Overall equity investment fell 4% to £12.3bn, with the top 10 fundraisings accounting for 23% of the total — the highest concentration since 2020.
• Seed-stage deals dropped 27% and venture-stage 13%, pointing to a market tilting toward fewer, larger AI bets.

The British Business Bank’s 2026 tracker captures a market reorganising itself around AI. The sector accounted for 26% of all deals last year — almost double its 2022 share — while investment in AI-related transactions rose 48%. That concentration came as the wider pool shrank, leaving earlier-stage and non-AI founders competing for a smaller share.

Capital pools at the top

The figures describe a barbell. Growth-stage investment held up and Digital and Technology remained the largest recipient of funding, but seed and venture rounds fell sharply. University spinouts, a UK strength, were not spared: spinout equity deals dropped 33% year on year and their investment value halved, despite the UK outpacing the US, Germany and France on spinout deal growth over 2021–2025.

Regionally, the story is more encouraging. The North West posted an 82% rise in equity investment, Scotland 74% and the South West 104% — gains linked to a handful of large AI and energy deals. London’s share slipped from 60% to 57%, a modest loosening of the capital’s dominance. “The concentration of investment into AI highlights both the scale of the opportunity and the challenges within the wider market,” said the Bank’s chief investment officer, Leandros Kalisperas, warning that capital must remain available “across sectors and stages”.

For UK founders, the data sharpens a familiar tension: AI is where the money is, but the funnel for everyone else is narrowing. It also lands against evidence that deployment, not just capital, is where value leaks — with UK businesses estimated to waste £67bn a year on failed AI projects.

Looking forward

The Bank plans to unlock around £26bn of private capital alongside £13bn of its own over five years, plus £4bn across the government’s industrial-strategy sectors and £2.6bn for entrepreneurs. Whether that keeps seed-stage and regional pipelines alive — rather than reinforcing a winner-takes-most AI market — will shape how diverse the UK’s next generation of companies looks.