BBB Small Business Equity Tracker 2026: £5.4bn invested in UK AI companies while spinouts get more external funding

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AI companies captured a record share of equity investment in 2025, while Advanced Manufacturing and Digital and Technologies led the IS-8 sectors on investment value growth, according to the British Business Bank’s Small Business Equity Tracker 2026.

The report is particularly interesting now, given the announcement this week of plans for the BBB to further support finance for and especially bank lending to IP-rich SMEs – the latter via a 12-month ringfenced £500m under the ENABLE Guarantee to encourage banks to develop IP-backed lending solutions.

This report provides an in-depth assessment of trends in UK equity finance activity in 2025 for smaller businesses. Some main findings:

• Investment into AI companies reached a record high of £5.4bn in 2025, accounting for 44% of total investment into smaller businesses and 26% of deals.

• Advanced Manufacturing and Digital and Technologies saw the largest increases in investment value across the Government’s key IS-8 business sectors in 2025, rising by 49% and 21% respectively.

• UK smaller businesses raised £12.3bn of equity investment in 2025, down 4% from 2024. Despite the decline, total investment in 2025 was the fifth highest on record, and remained materially above pre-pandemic levels.

• Equity deal numbers among smaller businesses declined by 17% to 2,002 deals compared to 2024.

• Across the market as a whole (including larger businesses), announced deals fell by 16% in 2025 to 2,075, while total investment declined by 3% to £17.0bn.

• The BBB itself supported 15% of smaller business equity deals between 2023-2025. These deals accounted for 16% of total investment across the market.

• The BBB’s activity was focused towards the seed stage. Over half (54%) of BBB-supported deals were at the seed stage, higher than the wider equity market (39%).

The report includes a section focusing on UK university and research institution spinouts.

The BBB says these are most concentrated in Life Sciences, where they accounted for 42% of deals between 2021 and 2025, but also made a material contribution in other key sectors such as Advanced Manufacturing (31%), Clean Energy (16%) and Professional and Business Services (10%).

During the past decade, the BBB research found, “UK spinouts have seen a substantial expansion in access to external financing over the past decade, particularly in the post-pandemic period.” Between 2023 and 2025, the BBB’s equity programmes supported one in every five (20%) academic spinout deals during the period.

The report observes:

“The Bank has significantly increased its support for spinout equity deals in recent years, backing 295 between 2021 and 2025, almost three times the number supported in the previous five years.”

Much of this support has targeted areas of the UK where equity funding availability has historically been weaker, such as the Northern Growth Corridor.

The report also found that UK spinouts’ overall progression through the funding pipeline was strong with over 76% of those that completed a first equity round in 2016-2018 going on to raise follow-on funding.

However, the report adds, part of this stronger progression may  also reflect a slower path to exit.

“By the end of 2025, 14% of spinouts receiving a first equity deal in 2016-2018 had recorded an exit, compared with 21% of other Technology/IP-based businesses.”

The IS8 sectors, as defined in the Labour Government’s 2025 policy paper, The UK’s Modern Industrial Strategy, are eight growth-driving sectors comprising:

• Advanced Manufacturing

• Clean Energy Industries

• Creative Industries

• Defence

• Digital and Technologies

• Financial Services

• Life Sciences

• Professional and Business Services