Investment into UK plummets as global economic challenges forces Venture Capital (VC) funds to proceed with caution

VC investment into the UK fell dramatically during the summer as the economic challenges and an impending global recession saw VCs take a cautious approach to investments.

After six robust quarters, both VC investment and the number of VC deals completed in the UK dropped considerably in Q3 22. $4.6 billion of VC money was invested into UK businesses during Q3 22 – half of the amount seen in the previous quarter (9.2), and the lowest seen since Q3 20.  As investments moved ahead with caution, the volume of deals completed in the quarter fell by over a third to 575 (from 865 in Q2 22) the lowest seen since Q3 16.

VC investments in innovative businesses outside of the capital accounted for 51 per cent (293 deals) of UK deals completed over the summer. Of the $4.2 billion invested in UK businesses during Q3 22, VCs kept maintained their appetite for late-stage businesses, which accounted for more an a third (39 per cent) of all VC investments completed in the UK during Q3 22, with the bulk of these happening outside of London (54 per cent).

Globally, VC investment dropped to below $100 billion in Q3’22 as deal levels fell to 7,817 in Q3’22 – the lowest level since Q4’17. Deal numbers across the Americas, Europe and Asia fell, with Americas attracting more than half of global VC total, $45.5 billion, during the quarter.

Despite the challenging market conditions, we're starting to see interest from US PE firms and corporates, given the volatility of the value of the pound this quarter. As we move into Q3'22, we are also witnessing increased M&A activity, and investment interest.

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

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UK trends to watch in Q4’22

  • Geopolitical and macroeconomic uncertainty expected to continue, which could impact on investor sentiment and VC funding in the region
  • Growing interest from overseas investors looking for attractive deals could spur additional investment and M&A activity for UK in Q4’22 and Q1’23
  • Interest in healthtech to remain strong

Read more UK and global insights in the Global Venture Pulse Q3 2022 report.

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