AI puts UK startup funding back in the big leagues with strongest first half since 2022, new data shows

UK startup funding recorded its strongest opening half since 2022, as investors placed increasingly large bets on AI, computing infrastructure and science-led companies.

New findings shared with EU-Startups show that capital is returning at scale, although the recovery is being shaped by fewer deals and a small group of unusually large rounds.

Analysis from HSBC Innovation Banking UK and Dealroom found that UK startups and scaleups raised €14.8 billion ($17 billion) in venture capital during the first half of 2026. This represented a 102% increase from the same period in 2025 and gave the UK 39% of all European venture capital investment.

A separate report from data intelligence platform Tracxn placed UK technology funding at €13.3 billion ($15.3 billion) for the period from 1 January to 30 June 2026, an 84% increase in the second half of 2025.

These totals are not directly interchangeable because the sources are using different coverage and comparison periods, but both point to the same trend: substantially more capital is flowing into UK technology companies.

At the centre of the rebound are London-based AI drug discovery company Isomorphic Labs, AI infrastructure provider Nscale, autonomous driving startup Wayve and AI company Ineffable Intelligence.

They raised €1.8 billion ($2.1 billion), €1.7 billion ($2 billion), €1 billion ($1.2 billion) and €960 million ($1.1 billion).

These deals formed part of a wider concentration of capital at the top of the market. HSBC and Dealroom counted 28 rounds worth more than €87 million ($100 million), while rounds of at least €218 million ($250 million) contributed €7.5 billion ($8.6 billion), or more than half of all venture capital invested.

Late-stage companies secured 68% of total funding, compared with 42% a year earlier and a European average of 59%.

Tracxn similarly found that the number of completed funding rounds fell from 543 in the second half of 2025 to 490 in the first half of 2026. Investors were therefore writing fewer but substantially larger cheques.

Its stage-by-stage data nevertheless indicated growth across the market, with Seed investment increasing 128%, early-stage funding rising 50% and late-stage capital climbing 120%.

Fuel Ventures, Y Combinator and SFC Capital emerged as the most active Seed investors in Tracxn’s analysis. AlbionVC, Mercia Ventures and Balderton Capital led at the early stage, while Sofina, SoftBank Vision Fund and Bond Capital were among the most prominent late-stage backers.

Breakout companies at Series B and Series C also raised a combined €3.3 billion ($3.8 billion), suggesting that capital was not solely reserved for the largest established scaleups.

What is clear is that AI was the main engine of the funding increase seen across the UK.

According to HSBC and Dealroom, UK AI startups raised a record €11 billion ($12.6 billion) during the first half of 2026, more than four times the amount secured during the same period in 2025.

The sector accounted for nearly three quarters of all UK venture capital investment and 19 of the country’s 28 megarounds.

Enterprise software attracted €4.5 billion ($5.2 billion) in AI funding, followed by health with €2.2 billion ($2.6 billion), hosting with €1.8 billion ($2.1 billion) and robotics with €1.3 billion ($1.5 billion).

These figures show that AI investment is spreading beyond model developers and software applications into healthcare, industrial automation and the physical infrastructure required to train and operate increasingly demanding systems.

Tracxn’s findings reinforced this shift towards infrastructure. Enterprise applications remained the largest category, raising €7.6 billion ($8.7 billion), but enterprise infrastructure funding increased 140%.

AI infrastructure and high-performance computing became its two largest funding themes, securing €4.5 billion ($5.2 billion) and €3.1 billion ($3.6 billion), respectively.

Companies such as Nscale and FluidStack attracted capital to expand AI data centre, cloud and computing capacity. High-performance computing as a service also moved to the top of Tracxn’s business model ranking, while data centre providers entered the three largest categories for the first time.

The figures indicate that investors increasingly view computing capacity as a standalone opportunity rather than simply a supporting layer for AI applications.

Science-led companies were another major component of the recovery. UK DeepTech and life sciences companies gave the country 41% of all European investment across the two fields.

This was up from 23% in the second half of 2025, with large rounds in BioTech, semiconductors and quantum computing strengthening the UK’s position.

Tracxn recorded a 228% increase in life sciences investment, supported by Isomorphic Labs’ Series B.

Emily Turner, CEO, HSBC Innovation Banking UK, said: “The first half of 2026 demonstrates the continued strength of the UK’s innovation ecosystem, with record levels of investment reflecting growing confidence from both domestic and international investors. What is particularly encouraging is how AI is increasingly being applied across sectors. We’re seeing it create new opportunities in sectors from life sciences and DeepTech to enterprise software, while helping companies compete on a global stage.

“The UK’s combination of world-class research, entrepreneurial talent and access to capital continues to make it one of the most attractive places in the world to build and scale innovative businesses. As success increasingly emerges from innovation hubs across the country, the foundations are in place for the next generation of breakthrough companies to scale globally.”

The UK now has an innovation economy valued at €1.4 trillion ($1.7 trillion) and is home to 217 unicorns, according to HSBC and Dealroom, with 18 companies joining the group so far in 2026.

The country raised more venture capital than France, Germany, Sweden and Switzerland combined, recording the highest year-on-year growth among Europe’s largest startup markets.

However, the gains remained geographically uneven. HSBC and Dealroom identified Cambridge, Reading, Oxford and Edinburgh as the leading centres outside London. AI, DeepTech and life sciences companies drove much of this regional activity.

Tracxn’s narrower technology dataset gave London an even more dominant position. Companies based in the capital raised 86% of the total and an increase from 79% in the previous half.

Cambridge accounted for 4%, while Reading, Oxford and Norwich followed. Reading and Norwich recorded sharp increases, although each was helped by a single large round.

The exit market presented a more cautious picture. Tracxn recorded only two initial public offerings, General Oceans and Metatek, compared with seven during the second half of 2025.

Acquisitions declined 20% from 209 to 167, even as the average time between a company’s first funding and acquisition increased from 12.7 to 15.5 years.

Once again, a few deals provided most of the value. Mastercard’s acquisition of BVNK, eBay’s purchase of Depop and Genius Sports’ acquisition of Legend together outweighed the other 164 disclosed acquisitions.

No buyer completed more than two purchases during the half, pointing to a selective market rather than a broad rush towards consolidation.

The first half of 2026 therefore marks a clear funding recovery, but not a return to the more evenly distributed venture market seen in previous cycles. Capital is concentrating around AI, infrastructure, life sciences, London and companies capable of raising at global scale.

For founders outside those categories, the fall in deal numbers suggests that competition for investor attention remains intense, even during the UK’s strongest first half in four years.