East Midlands smaller businesses raise £64m in equity investment as AI deals dominate UK market
Added by Love Business East Midlands | 2 July 2026
East Midlands smaller businesses raised £64m in equity investment across 49 deals in 2025 according to the British Business Bank’s annual Small Business Equity Tracker, published today.
AI is reshaping the UK’s startup economy amid a national trend for larger deals concentrated around high-value opportunities. AI attracted a record share of investment in 2025 and drove larger deals, against the backdrop of a slight decline in overall activity.
AI companies accounted for 44% of total UK equity investment into smaller businesses in 2025, the highest share on record. AI also represented more than a quarter (26%) of all deals, nearly doubling its share since 2022. Investment in AI-related deals rose by 48% year-on-year.
Meanwhile, the British Business Bank continued to play a significant role across the UK market, supporting 15% of all deals and 16% of investment between 2023 and 2025, with a particular focus on innovation-led businesses, including in AI.
Spinout funding expands significantly highlighting the UK’s research strengths
Spinout companies play a key role in translating academic innovation into commercial growth, and supporting spinouts remains a key priority for the Bank.
Funding for UK university spinouts has grown strongly in recent years, with venture capital deal volumes up by 95% in 2021-2025 compared to 2016-2020, outpacing the United States, Germany and France. This increase highlights the UK’s position as a world-leading research and development hub, home to four of the world’s top 10 universities. The British Business Bank continues to play an important role in this segment, supporting a higher share of spinout deals (16%) than the wider market (12%) during 2023-2025.
The UK had the highest number of venture capital-backed spinouts among international comparators, including the United States, Germany and France, when controlling for the size of the research base.
While UK spinouts' access to equity funding has expanded strongly over the last ten years, it slowed in 2025 and remains geographically uneven. UK spinouts’ overall equity activity declined in 2025, with deals down by 33% and investment value falling by half (-51%) year-on-year.
East Midlands’ universities including the University of Nottingham, University of Leicester and University of Lincoln have a strong track record of supporting innovative spinout firms. In 2025, the University of Nottingham spinout Forge Genetics secured £2m from the Midlands Engine Investment Fund to support the development of its novel gene-editing tool.
The Bank’s Five-Year Strategic Plan highlights its commitment to strengthening spinouts from science and innovation clusters across the UK, helping to grow local investor ecosystems through its £285 million Regional Angels Programme and where needed, investing the first capital into deals to support emerging technologies where the UK has the potential to lead globally.
The Bank’s Midlands Engine Investment Fund II continues to support firms across the region. The fund, which offers a range of commercial finance including equity investment of up to £5 million, has driven £100 million into 225 firms since it launched two years ago.
Mark Sterritt, Managing Director, British Business Bank Local Growth Team, said:
“The East Midlands continues to strengthen the UK’s position as a driver of global innovation with its long established support for cutting-edge spinouts. While spinout funding has grown significantly in over the last ten years, work to reduce regional imbalances in funding remains a priority - and an opportunity for the region.
“The concentration of investor interest in AI and its related technologies more widely plays well for the region given its tech ecosystem, universities and talent pool. The opportunity exists for founders and investors alike."
Larger deals drive the UK smaller business equity market
Investors concentrated capital into a smaller number of larger transactions in 2025, with the UK’s top 10 fundraisings accounting for nearly a quarter (23%) of all investment, the highest level since 2020. Equity investment into UK smaller businesses fell slightly, by 4% to £12.3bn in 2025, however, investment remained above pre-pandemic levels making 2025 the fifth highest year on record.
The total deal value and volume contracted by over a third and a fifth respectively in the East Midlands region, but remained consistent with pre-pandemic levels.
The Bank is expanding its investments across the UK and is committing £2.6bn of capital to support entrepreneurs wherever and whoever they are, including through two new Nations and Regions Investment Funds.
