Value of VC investment in UK businesses remains stable despite global economic uncertainty

The value of Venture Capital investment in fast-growth businesses in the UK remained steady over the last quarter, despite the uncertain global economic environment.

UK businesses attracted £7.2 ($8.6) billion in VC investment during Q2 2022, down on the  £8.5 ($10.2) billion raised in the opening quarter of the year. Deal volumes were also down from 901 deals completed in Q1 22 to 667 in this quarter.

More than £15.7 ($18.8) billion of VC funding has been invested in UK businesses in the first half of 2022, up on the £14.6 ($17.5) billion raised in the first half of last year, however, deal volumes are down by over 11 percent as increasingly cautious VC investors renew their focus on late-stage deals and take longer to conduct due diligence on their investments.

Funding levels globally also saw a decline, falling to £100 ($120) billion (from £138/$165.3 billion Q1 22) in the three months to June, as the war in Ukraine, high levels of inflation, and rising interest rates shook global markets.

Despite the global downturn, the value of VC investment in UK businesses continued at a steady pace in Q2 22. UK businesses have raised over £1.2 billion more in the opening half of this year then where we were at this time in 2021. However, the decline in the volume of deals being completed is a strong indicator that while there continues to be a reasonable amount of dry powder in the market, investors are becoming more cautious.

Warren Middleton
Lead Partner, Emerging Giants Centre of Excellence
KPMG in the UK

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UK trends to watch for in Q3’22

  • The geopolitical and macroeconomic uncertainty is likely to continue downward pressure on valuations, which could lead to decreasing levels of investment.
  • VC deals may take longer to complete as investors enhance their due diligence of deals.
  • Fintech will remain a strong area of investment, in addition to supply chain and logistics, cybersecurity, and alternative energy businesses.
  • The consumer tech sector has seen the biggest slowdown, along with the industrial sector where skyrocketing costs and overhead increases are now coming through.
  • Given rising inflation and interest rates, consumer-focused companies could lose some lustre with VC investors, in favour of B2B solutions and investments.

Read more UK and global insights in the Global Venture Pulse Q2 2022 report.

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