- UK domestic investor participation drops from 57% at seed stage to under 10% at late stage.
- In quantum, the UK made up over 18% of global VC funding since 2020.
UK deep tech venture capital investment ranks third globally behind the USA and China, with 2025 being on track to be the second strongest year on record with nearly $6 billion invested so far, according to a new report from the Royal Academy of Engineering Enterprise Hub. But behind those rankings the details of amounts invested in deep tech highlight a wide gulf between the USA and the rest of the world: In 2025 the USA invested $136 billion, with China investing $11 billion and the UK nearly $6 billion.
Today’s Royal Academy of Engineering Enterprise Hub report on the State of UK Deep Tech™ shows the USA invested 59% of venture capital funding into deep tech, compared with 43% in China and 31% in the UK, which is more representative of European and global averages. The shift towards deep tech funding, especially over the last few years, reflects its growing strategic importance, and it underpins five of the eight priority areas in the UK Industrial Strategy.
The USA spent 77% of its deep tech venture funding on AI, both France and Germany have increased funding in this area, spending 65% and 52% respectively. For the UK the figures sit at around 39% and for China, 42%. However, the UK figures belie the fundamental importance of AI as a cross-cutting enabler in the UK, accelerating progress particularly in areas like life sciences, robotics, materials and manufacturing
The report also highlights that the UK has global strengths in quantum, biotech and the emerging applications of techbio, as well as pharma and medical devices. In quantum, the UK made up over 18% of global VC funding since 2020 and it is the third most funded sector in the UK in 2025.
Startups, spinouts and exits
The UK excels at nurturing deep tech ventures from formation through to growth and facilitating exits: the report shows that UK startups are more likely to progress from seed to series A funding rounds than the rest of Europe. Over 50 UK companies have reached $1 billion+ valuation or $100 million+ revenue. 2025 was remarkably active, with nearly $20 billion in mergers and acquisitions value and five $1 billion+ exits.
While the UK is consistently effective at generating and scaling frontier technologies through early stages, it often requires global investment to support scale at the later levels. State of UK Deep Tech™ shows that UK domestic investor participation drops from 57% at seed stage to under 10% at late stage.
This late-stage funding mostly comes from the USA with additional activity from Germany, France, Japan, and Nordic markets, demonstrating both strong international demand for UK-origin deep tech companies as well as a lack of domestic late-stage funding. Closing this gap would require an additional $4–11 billion annually, which measures like the Mansion House reforms aim to address through pension fund allocations.
State of UK Deep Tech™ also shows that academic spinouts are the backbone of UK deep tech innovation, especially in sectors such as quantum, photonics and life sciences. Since 2010, just under one thousand VC-backed deep tech spinouts have been created, representing 34% of the ecosystem. Their performance underscores the UK’s globally competitive research commercialisation model and the critical role of universities in translating science into scalable ventures.
Innovation and defence
2025 is projected to be the highest funded year on record for defence VC funding, heavily driven by Cambridge Aerospace, which raised a $100 million round to develop systems for intercepting drones and cruise missiles. The report notes that the UK is an attractive destination as it has established clusters of expertise, with five of the top ten European cities for defence investment: London, Reading, Cambridge, Oxford and Bristol. Several international defence startups are establishing a presence in the UK due to regulatory reforms, commitments to opening procurement, rising defence investment and prioritisation of domestic suppliers. Examples include Helsing and Quantum Systems from Germany and Tekever from Portugal.
The Strategic Defence Review and the Defence Industrial Strategy set out the ambition for the UK to become a “tech-enabled defence power” by 2035. State of UK Deep Tech™ shows that the UK defence tech startup ecosystem is growing, but not at the same rate as some other international markets. The UK accounted for 3% of global defence tech funding since 2020 compared with 4.3% of global deep tech investment overall. In Europe, Germany has significantly increased its defence VC funding since 2024– investing $1.6 billion compared to $435.7 million in the UK.
New Benchmark Index
In addition to its annual assessment of the UK deep tech landscape, the Royal Academy of Engineering Enterprise Hub has commissioned Dealroom to develop a new State of UK Deep Tech™ Index. It is launched with today’s report and is a dynamic dashboard of data including deep tech venture capital sums invested and global ranking, updating on a daily basis from mid-December. It will provide regional and city level investment analysis and snapshot summaries to provide a clear view of market direction and momentum. This data will provide founders, investors and policymakers a shared reference point to guide decisions and drive long-term growth.
Sir John Lazar CBE FREng, President of the Royal Academy of Engineering, says:
“The UK ranks third worldwide for deep tech venture capital, and as the sector matures there’s room to diversify outside the patterns that have emerged. Today’s report shows that the ‘golden triangle’ of London, Cambridge and Oxford still commands 77% of UK deep tech venture capital funding. So, there’s much more potential for regional renewal and new high growth businesses to emerge from a wider pool of talented engineers and scientists across the UK.”
“In 2025 we significantly grew our network of regional Hubs, opening in Newcastle, Liverpool and Sheffield. We now have six Hubs outside London and aim to launch two more next year. Our deep commitment to a place-based economy is aimed at expanding the UK talent base and supporting deep tech startups that are so crucial to our economic growth.”
Science Minister Lord Vallance said:
“This report shows how the UK's deep tech innovators are pulling investment into economy, particularly in the high growth-potential sectors like life sciences and advanced manufacturing that our modern Industrial Strategy is focused on.”
Ana Avaliani, Director at the Royal Academy of Engineering Enterprise Hub said:
"The growth of deep tech companies in the UK is stymied by number of factors including access to late-stage funding, although we have seen positive movement toward unlocking growth capital, and we look forward to seeing pace of Mansion House reforms being accelerated.”
“To address this challenge, at the Royal Academy of Engineering we have designed the Science and Technology Venture Capital Fellowship in partnership with Imperial Business School to support talented investors identify and deploy capital into high-potential, scalable deep tech ventures. In its second year, the Fellowship aims to create new generation of investors capable of making informed investment decisions based on a grounded understanding of deep tech.”
“For some time to come, greater access to patient, long-term capital that matches the ambition and timescale of deep tech will continue to be an essential ingredient for turning our world-class research into world changing industries.”
Notes for editors
1. The Royal Academy of Engineering Enterprise Hub was formally launched in April 2013. Since then, we have supported over 600 researchers, recent graduates, and leaders of SMEs to start and scale up businesses that can give practical application to innovative engineering solutions. Hub Members have created over 6,000 jobs and raised nearly £4 billion in funding.
2. The Royal Academy of Engineering creates and leads a community of outstanding experts and innovators to engineer better lives. As a charity and a Fellowship, we deliver public benefit from excellence in engineering and technology and convene leading businesspeople, entrepreneurs, innovators and academics across the profession. As a National Academy, we provide leadership for engineering and technology, and independent, expert advice to policymakers in the UK and beyond.
Our work is enabled by funding from the Department for Science, Innovation and Technology, corporate and university partners, charitable trusts and foundations, and individual donors.