The West Country has emerged as the fastest-growing investment market in the United Kingdom, according to new research from the British Business Bank. The region recorded the largest percentage increase in equity investment of any UK area in 2025, propelled by substantial technology and energy megadeals.
Investment surge amid national decline
Investment into smaller businesses in the South West more than doubled to £687 million last year, marking a 104 percent increase compared to 2024. This growth occurred despite a 13 percent drop in the number of deals to 121, as investors concentrated capital into fewer, larger transactions. The megadeals also doubled the South West's share of UK equity investment from three percent in 2024 to six percent in 2025.
Notable deals included £187 million raised by Bristol-based tech firm The Smarter Web Company through nine deals in 2025, and two growth-stage rounds of £105 million for Salisbury-based energy company Rockhopper Exploration and £100 million for clean energy company Low Carbon, which operates in Bristol and Exeter.
National context and challenges
Across the rest of the UK, deal values fell overall by four percent and volumes by 17 percent. Ed Tellwright, director for the South West at British Business Bank Local Growth Team, commented: "Thanks to a handful of large deals the South West has bucked the national trend and seen the fastest equity growth in the UK. But the funding environment remains challenging, especially for seed stage and non-AI businesses."
Tellwright added: "That's why we remain committed to helping smaller businesses get the finance they need to start, scale and stay in the UK, and that includes activity concentrated at early stage where market declines have been most pronounced."
British Business Bank support
Between 2023 and 2025, the British Business Bank supported 19 percent of all equity deals in the South West and 11 percent of total investment value. Its £200 million South West Investment Fund, launched in 2023 to boost capital flow to new and growing businesses, has funded more than 50 equity deals to date with approximately £37 million of investment.
The number of South West spin-out businesses supported by the bank has grown from less than five percent between 2016 and 2020 to more than 25 percent in the last five years. This includes University of Bristol spin-out QLM Technology in Torbay, which received £1 million from the South West Investment Fund as part of a £3.5 million round in 2025 to support development and commercial scaling of its advanced methane monitoring technology.
AI firms capture record investment
Nationally, the Small Business Equity Tracker showed that AI continues to reshape the UK's startup economy, attracting a record share of investment in 2025 and driving larger deals. AI companies accounted for 44 percent of total equity investment into smaller businesses in 2025, the highest share on record. AI also represented more than a quarter (26 percent) of all deals, nearly doubling its share since 2022. Investment in AI-related deals rose by 48 percent year-on-year, highlighting strong investor appetite despite a broader market slowdown.
Investors concentrated capital into fewer, larger transactions in 2025, with the UK's top 10 fundraisings accounting for nearly a quarter (23 percent) of all investment, the highest level since 2020. Equity investment into UK smaller businesses fell slightly, by four percent to £12.3 billion last year, but remained above pre-pandemic levels.
While national growth-stage investment proved resilient, early-stage deals at seed and venture stages were lower. The digital and technologies sector remained the largest recipient of equity investment, while advanced manufacturing saw strong growth in investment value. Meanwhile, investment in financial services and life sciences declined in 2025.
