Much of the UK’s $1.2 trillion tech ecosystem is anchored in London. Recently we have seen significant growth in Greater Manchester, West Yorkshire and West Midlands, but there’s still a big gap between London / South East and the rest of the UK. Scaling companies outside of London is essential, to ensure that the UK is one of the best places in the world for tech businesses to scale – regardless of where in the country a company is based.
60% of companies recently surveyed by ScaleUp Institute perceive funding to be concentrated in London/South East. They are right. London receives 6x more investment than the next nearest region; £5.56bn investment value compared to £0.87bn in the South East (the next highest region). Regions outside of these 2 markets have much lower investment numbers and are in decline.
This funding gap concentration is most pronounced at the critical late Seed-to-Series A transition. We tracked quarterly decline to a 7-year low in Q1-25, with only 7% of seed-funded startups progressing to Series A (VC rounds £2-10m). Less money flows into startups as they begin to scale, especially in the regions.
More regional funding needs to be invested into regional startups, alongside improved access to ‘London’ investors
Regional perspective
I have run businesses in the Midlands (creative industries), the North (digital media) and London (investment), and more recently worked with private, public, academia, local and under-represented founder groups across all regions – helping prepare companies to raise growth capital to scale. I’ve worked on delivering scaleup support in every Nation and most regions, and have collaborated with 20 nationwide universities to provide high IP spinouts with investment pathways. Our VenturePath digital investor readiness tools are accessed by founders across all UK regions and 46% of our founder community is outside London. This gives me an insight into what could be possible if regional scaleups were able to access greater investment and support.
Existing support landscape
We researched regional support infrastructure: local training programmes, private sector accelerators, and Central/Local government support (UK Tech Cluster Group, Business Growth Service, Growth Hub Network etc.). Amazingly, Innovate UK Business Growth employs around 400 nationwide ‘Innovation Growth Specialists’ apparently providing 1:1 funding and finance support, plus 30-40 ‘Scale Up Directors’. The British Business Bank also operates ScaleUp Directors across 12 regions, “raising awareness of the finance ecosystem locally”.
Persistent problem
Despite significant government and private sector efforts, regional investment in startups as they scale, is failing – the regional investment gap data is indisputable.
Investment consistently ranks as a top growth constraint. Regional founders are under-funded and under-served with access to capital and the specialist knowhow to prepare for the institutional investment to scale properly. They often have limited access to those who’ve successfully navigated the venture-backed journey – especially in their region, and struggle to access growth investors. These structural barriers prevent fast growth for promising regional startups.
Regional investment readiness gaps
Knowing from where and how to access capital is one of the biggest growth constraints for the regions. Regional investment levels are low, and declining, companies feel ill-prepared and existing support is fragmented.
Regional companies often lack adequate or appropriate investor readiness support. Recent research shows 5 in 10 scaleups wanting ‘easier local access to funding advice and investor introductions’. Local private sector operators often lack the institutional investor knowledge or networks needed to ensure effective support as local companies start to scale.
Regional investment readiness support needs to double, including expert advice and appropriate introductions.
Regional support infrastructure fragmented
Whilst multiple regional, and national, business support and investment initiatives exist across regions, they often operate in silos without coordinated focus. 52% of scaling companies feel ‘there is very little support for businesses like theirs’.
National Government has acknowledged this disconnect. No one department is addressing individual startup investor readiness and advice to scaleup. Low levels of regional investor readiness, alongside the lack of joined-up support has resulted in the current record low rates of progression for startups-to-scaleups.
Regional scaleups require a new layer of coordinated and enhanced investment-focused business support.
Improving access to investment is the most significant gap in all regional ecosystems; a horizontal challenge.
Solutions
By improving investment collaboration between local partners and nationwide investors we can transform the UK’s regional scaleup ecosystems permanently. Creating ‘systematically connected’ regional investment ecosystems, location will no longer limit investment-backed scaling success.
Regional founders need clear pathways to growth capital, ensuring systematic access to startup-to-scaleup investment expertise, and active support networks. Regional scaleups should be helped to prepare for growth and investment; signposted to both regional and national support networks, enabling improved access to the UK’s best investors, ‘funded founder’ peer networks, structured investment readiness and on-demand access to proven scaling methodologies and programmes.
This is something we are working on at VenturePath, but we encourage more regional scaleups, regional ecosystem players and investors to come together, to strengthen ecosystems and create more venture-backed successes.
