UK startups and scaleups raised over £5.7bn in venture capital in Q1 2026, marking a 60% increase on the same period last year and the strongest first quarter since 2022, according to new analysis from HSBC Innovation Banking UK and Dealroom.
Growth was driven by a surge in late-stage investment and record levels of AI funding, highlighting renewed investor conviction in scaling UK businesses.
The UK remains Europe’s leading destination for venture capital, raising more than France, Germany and the Netherlands combined in the quarter and accounting for 41% of total European investment.
The UK also maintains a significant lead in AI, creating approximately twice as many AI startups and unicorns as any other European country with seven new additions in Q1 alone, and generating four times the enterprise value of its nearest European peers.
AI led the charge during Q1, with UK AI startups raising a record £4.27bn – nearly three quarters (74%) of all venture capital raised. This represents a fivefold increase in AI’s share of UK VC since 2022.
More than 100 AI funding rounds were completed during the period, with late-stage deals driving the bulk of funding. The largest rounds included Nscale (£1.47bn), Wayve (£885m) and ElevenLabs (£369m).
VC investment in Q1 was concentrated in larger, late-stage deals, with 12 megarounds of £73.7m or more, contributing £3.76bn and accounting for 65% of total capital raised.
The average megaround size increased by 41% year-on-year to £314m. Series B and C also attracted £1.3bn in funding, demonstrating continued momentum among scaling businesses.
Hosting (£1.5bn), robotics (£1bn) and transportation (£957m) were the most funded sectors in Q1, driven by a small number of large AI-led rounds. Media and health followed as top sectors, with funding also supported by AI-driven deals.
Traditional sectors such as fintech, health and energy continue to lead in deal volume, despite accounting for just 21% of total VC investment.
“The UK continues to demonstrate the depth and resilience of its innovation ecosystem, with venture capital investment accelerating alongside a surge in AI-led growth,” says Emily Turner, CEO at HSBC Innovation Banking UK. “The scale of late-stage funding and the dominance of AI reflect both the maturity of the market and the global relevance of UK innovation.
“With strong momentum across scaling companies and continued leadership in Europe, the UK is well positioned to support the next generation of high-growth businesses and translate innovation into long-term economic impact.”
