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

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Senior City Reporter

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Growth capital has hit a seven-year low on both volume and value with the UK start-up to scale-up pipeline “broken”, a fresh report has warned.

Figures seen by City PM revealed Series A funding – investments of £2m to £10m for startups looking to grow – had slumped to £2.4bn in the 12 months to March 2025. 

This was a £500m drop from £2.9bn in March 2024, and £3bn in 2023, according to a report from investment platform Venture Path compiling data from Dealroom and Sifted. 

In 2021 one in four startups that raised seed funding – the first formal funding stage to develop a business – successfully progressed to the growth stage of Series A. 

But the success rate has drastically dropped with only one in 14 now managing to raise growth capital to scale. 

Venture Path’s report slammed the funding ladder as “broken” as just 82 companies completed Series A funding in the first-quarter of 2025, compared to 120 in the same period of 2024.

UK risks becoming ‘nation of micro businesses’

Venture Path’s Ian Merricks told City PM: “If companies cannot progress from start-up to scale-up funding, we become a nation of micro businesses, lacking scale.”

“From 5.5m small and medium-sized enterprises, less than 400 a year are able to access first VC funding, and this low number is declining. This has serious knock-on effects throughout the investment cycle”.

The Treasury will publish its inaugural Financial Services Growth and Competitiveness Strategy on July 15, where it will outline its role in fostering growth. 

Merricks said: “Companies remain under-supported to be investor ready and to know how best to access VCs. 

“There are massive discrepancies in who can access VC funding, especially for under-represented regions and founders, current Government initiatives from Innovate UK and other public finance initiatives are not working at scale, as the continued decline demonstrates.”

The report also revealed Series B funding – later-stage growth capital – had stalled with flat values of capital invested at £2.3bn.