UK venture capital investment falls to lowest level in five years despite AI boom

The UK suffered its slowest quarter of venture capital (VC) investment in five years despite a surge in interest in the artificial intelligence (AI) sector, KPMG’s new report has revealed.

The latest KPMG Private Enterprise Venture Pulse report showed levels of investment dropped to £2.6 billion across 435 deals in the second quarter of 2025 – down from £3.8 billion in quarter one across 507 deals – as a result of a pullback across corporate VC activity.

However, AI remained a dominant investment theme alongside the areas of health tech and fintech with megadeals during the quarter including £251 million for EV charging firm Believ (London), cloud computing business XY Miners (Brighton) securing £223 million and £148 million for health tech firm CMR Surgical (Cambridge). This meant that, despite the overall downturn, the UK secured three of the top 10 deals across the whole of Europe.

Looking ahead, trends expected for quarter three and beyond include a continuation of subdued levels of VC investment, due to uncertainty being caused by fluctuating tariffs being imposed by the US, but one area of encouragement is that AI has been labelled as a ‘hot’ sector for growth by experts not just in the UK but across Europe and worldwide.

Nicole Lowe, UK Head of KPMG’s Emerging Giants practice, said: “While quarter two marked the slowest quarter for UK venture capital since early 2020, the long-term outlook remains strong, particularly in AI."

“We’re seeing growing confidence from investors in the UK’s innovation ecosystem, and the government’s significant AI-focused commitments, including job creation and infrastructure investment, signal a clear intention to position the country as a global leader in next-generation technologies.”

What’s happening elsewhere?

Global venture capital investment declined from £95 billion in quarter one to £75 billion in quarter two.

Despite the solid VC investment, however, global VC deal volume dropped to a decade-low of 7,360 in quarter two, down from 9,314 in quarter one, as many investors paused activity outside of resilient sectors like AI, fintech, and defence tech.

The Americas led VC investment globally, attracting £54 billion—more than 70% of all funding during quarter two; of this amount, over £52 billion came from the US alone. Europe came a very distant second, attracting £11.3 billion across 1,737 deals. Asia, meanwhile, continued to lag, pulling in just £9.5 billion across 2,022 deals.

In Asia, VC investment remained very weak in quarter two, despite a slight increase in total investment from £9.3 billion in quarter one to £9.5 billion—still the second-lowest total in over a decade. Deal volume in Asia dropped from 2,663 in quarter one to just 2,022 in quarter two.