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7JUN

AI takes record 44% of UK equity market

2 min read
10:09UTC

AI companies took a record 44% of UK smaller-business equity value in 2025, even as the total market shrank 4% to GBP12.3bn.

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TechnologyDeveloping
Key takeaway

Record AI concentration is hollowing out the UK's seed and spinout funding beneath a shrinking total market.

AI companies took a record 44% of UK smaller-business equity value in 2025, from a market that shrank 4% to GBP12.3bn, the British Business Bank (BBB), the UK government's development bank, reported on 2 July 2026 1. AI investment rose 48% over the year while every other sector contracted in both share and cash. The top 10 fundraisings absorbed 23% of all investment, the highest concentration since 2020, and seed deals fell 27%.

The BBB's chief investment officer, Leandros Kalisperas, said the concentration into AI reflects both the scale of the opportunity and the challenges across the wider market 2. The tracker measures the value of equity raised, not the number of companies funded, so a record share can sit on top of fewer names taking larger cheques.

A 48% rise in AI money against a 4% fall in the total meant growth-stage rounds pulled capital up and out of everything beneath them. The same barbell shape carried PhysicsX to a $300m round at a $2.4bn valuation in June . Fewer companies, larger cheques, one sector.

Deep Analysis

In plain English

The British Business Bank, the government's own economic development bank, publishes an annual scorecard on how much money young British companies raise by selling shares, known as equity funding. Its 2025 edition found AI companies grabbed a record 44p of every pound invested, even though the total pot shrank 4% to £12.3bn. That matters because seed rounds, the small first cheques that get a brand-new company off the ground, fell 27% over the same year. Money is increasingly flowing to already-large AI companies rather than to first-time founders starting from nothing.

Deep Analysis
Root Causes

AI-stage companies need far larger cheques than software-only peers at the same maturity, because training and inference compute costs push burn rates several times higher for the same set of milestones. That mechanical cost structure, not investor taste alone, pulls a disproportionate share of total capital toward AI even when deal counts stay flat.

The 27% fall in seed deals compounds the effect from the other end: removing smaller, cheaper first cheques shrinks the denominator, so a thinner bottom of the market mechanically inflates AI's percentage share of what remains.

What could happen next?
  • Risk

    A sustained funding squeeze on non-AI seed-stage founders could thin the pipeline of future UK scale-ups outside artificial intelligence.

  • Consequence

    Institutional and pension-linked funds carrying UK venture exposure are increasingly betting on one sector's valuations holding up.

Sources:British Business Bank
Mentions:British Business Bank →Small Business Equity Tracker →PhysicsX →CuspAI →Beauhurst →Onward →
First Reported In

Update #10 · AI takes record 44% as UK equity shrinks

British Business Bank· 4 Jul 2026
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Causes and effects
Caused by
PhysicsX hits $2.4bn on Temasek cash
PhysicsX's $300m Series C exemplified the AI-concentration barbell the BBB tracker now confirms nationally.
Occurred 8 Jun 2026
Read story →
UKRI confirms 58% cut to STFC labs
The STFC cuts extend the market-narrowing pattern the Bank's 2 July tracker showed in AI's record equity share.
Occurred 9 Jul 2026
Read story →
This Event
AI takes record 44% of UK equity market
AI megarounds are draining capital from the seed and spinout tiers, the first hard 2025 dataset to show it.
Different Perspectives
EQT
EQT
EQT was reported on 3 July to be in advanced talks for a further CuspAI stake on behalf of the EU's Scaleup Europe Fund, but does not appear on the round CuspAI closed. Whether Europe's own sovereign vehicle secured a position, was outbid, or withdrew is unresolved.
Invest-NL
Invest-NL
Invest-NL joined CuspAI's $450m round as a new state investor alongside Britain's Sovereign AI Unit, named in the company's own 20 July announcement. Any framing of British state capital arriving must also credit Dutch capital with the same access, since Invest-NL took the opportunity too.
Kleiner Perkins and Bezos Expeditions
Kleiner Perkins and Bezos Expeditions
Kleiner Perkins and Bezos Expeditions co-led CuspAI's $450m Series B at a $2.6bn valuation, a figure Lowdown has now reported three times since June. Silicon Valley and a family office, not a UK investor, set the price of Britain's highest-profile materials-AI company.
British Business Bank
British Business Bank
British Business Bank proposed a £100m debt fund for aerospace suppliers at Farnborough on 20 July, co-designed with Airbus, Rolls-Royce and GKN Aerospace. It is the Bank's first non-equity instrument this cycle, aimed at suppliers who can service a loan but have no equity story, though the structure remains unfinalised.
Institute of Physics
Institute of Physics
The Institute has long argued STFC's national-laboratory infrastructure, not its grant programmes, is the binding constraint on UK physics output, and warns mothballing capacity like Clara removes capability that cannot be rebuilt on a four-year cycle. It represents the discovery-science community absorbing the reallocation the Bank's equity cheques do not touch.
Helsing
Helsing
The Munich-headquartered defence-AI firm chose Plymouth over Continental sites for a £350m manufacturing plant building underwater surveillance gliders, alongside its record raise. Its choice of postcode signals confidence in UK manufacturing capacity for defence hardware even as it looks abroad for the capital financing that hardware.