Investment in UK university spinouts surged to £1.56bn in the first half of 2026, approaching a record set five years ago as international investors poured money into advanced computing and other frontier technologies.
But the headline rebound concealed a deepening weakness at the earliest stage of the funding pipeline, with first-time equity investment plunging by more than two-thirds.
Capital raised by companies spun out of British universities rose 38.2 per cent compared with the second half of 2025, reaching its second-highest half-year total in a decade, according to a report by Parkwalk, the UK’s most active investor in university spinouts, and private company data provider Beauhurst.
The total came close to the £1.58bn raised in the first half of 2021, when investment in university-backed businesses reached a record.
Yet the latest figures suggest a market increasingly powered by a handful of large transactions rather than a broad-based expansion in entrepreneurial activity.
Four deals accounted for £709mn, almost half of all capital raised in the first six months of the year. Three involved advanced computing companies: Quantum Motion, Oxford Quantum Circuits and Fractile. Oxford Quantum Circuits, which is backed by Parkwalk, secured £260mn in the largest round of the period.
Later-stage investment reached £760mn, its highest half-year level since 2021, reflecting growing appetite for companies that have moved beyond the earliest stages of commercialisation.
The picture was considerably less encouraging for new businesses. First-time equity investment fell from £148mn in the first half of 2025 to just £47mn in the same period this year, a decline of 68.3 per cent. The number of first-time deals dropped to 44, well below the peak of 73 recorded in the first half of 2021.
Meanwhile, the average deal size has more than doubled over the past decade, from £3.57mn to £7.24mn. The combination points to an ecosystem in which investors are committing larger sums to established companies while fewer fledgling ventures secure the initial funding needed to turn academic research into commercial products. Full-year investment in 2025 stood at £1.98bn, down 19.6 per cent on 2024.
Moray Wright, chief executive of Parkwalk, said the strength of deep technology investment should be welcomed, but warned that the decline in early-stage funding threatened the future supply of innovative businesses.
“British deeptech is attracting capital at a scale we have rarely seen, and that is something to celebrate,” he said. “But these figures carry a clear warning. First-time investment has fallen, and the companies vital to the future of the UK economy are struggling to raise their first round.”
Wright called on the government to strengthen and expand the Enterprise Investment Scheme (EIS), which offers tax incentives to investors in qualifying early-stage companies, arguing that greater long-term certainty could unlock private capital for university spinouts across the country.
The challenge extends beyond the availability of money. Britain has demonstrated an ability to attract overseas investors to its scientific discoveries, but has been less successful at ensuring that the economic value created by those businesses remains at home.
Rounds involving at least one international investor accounted for 86.1 per cent of investment in the first half of 2026, the highest proportion of the decade. International investors have also participated in 82.6 per cent of all later-stage investment since 2016.
Domestic investors remain central to the ecosystem’s day-to-day activity, taking part in 2,545 deals over the decade, more than six times the 408 involving US investors. Yet foreign buyers have increasingly dominated at the point of exit: international acquirers accounted for 75 per cent of spinout acquisitions in the first half of 2026 and 68.3 per cent since 2016. US buyers alone acquired 66 UK spinouts over the decade, compared with 57 acquired by UK buyers.
Greg Smith, chief executive of IP Group, Parkwalk’s parent company, said more domestic capital was needed to help British science-based businesses expand without transferring the value of their breakthroughs overseas.
“UK pension funds manage trillions of pounds, yet only a fraction reaches our most promising science-based businesses,” he said. “By backing British science at the growth stage, more of the value created in our universities would stay here, for savers, for the economy and for the country.”
The sector’s breadth is growing, although investment remains concentrated in a small number of regions. Digital and Technologies, including artificial intelligence, quantum computing and chips and processors, attracted £1.44bn over the past year. Advanced Manufacturing followed with £1.17bn, while Life Sciences secured £1.16bn — all areas aligned with the government’s Industrial Strategy priorities.
Geographically, however, nearly 80 per cent of investment since 2016 has flowed to the South East, East of England and London. Spinouts from the University of Oxford raised £5.39bn over the decade, compared with £3.99bn for Cambridge. The contrast with northern England is stark: Manchester spinouts raised £195mn, while those from Liverpool secured £19.6mn.
Parkwalk’s Northern Universities Venture Fund, launched with Northern Gritstone in 2025 and preparing for a second iteration, aims to channel more early-stage capital towards spinouts from Leeds, Liverpool, Manchester and Sheffield.
Parkwalk and IP Group recorded 42 deals in the year to the first half of 2026, ahead of Scottish Enterprise on 31 and the British Business Bank on 24. Over the past decade, they have invested in 98 later-stage spinout deals, more than twice as many as the next most active investor.
The figures underline Britain’s central dilemma: its universities can generate science that commands global investment, but the country must still find ways to finance the next generation of companies, scale them domestically and retain more of the rewards. Without a stronger pipeline of early-stage funding and deeper pools of UK growth capital, a record-breaking investment market may do less than expected to secure the long-term economic benefits of British research.
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