Growth Capital Update: Q1 2026
Flight to quality as larger deals dominate
259
deals completed
+20%
number of deals
£1.281 billion
growth capital raised
Our view of the market
2025 was not a great year for the UK’s growth capital market, but we did begin to detect signs of recovery in Q4. That recovery has continued strongly in the first quarter of 2026, with a significant increase in activity. Investors became more optimistic in the final months of 2025, as they were hopeful of an improving UK economy and a continued reduction in interest rates. They started to rebuild their deal pipelines in earnest in Q4 2025, and that has led to a rise in the number of deals completing in Q1 2026.
What investors could not have anticipated was the situation in the Middle East, which is likely to have a significant impact on the global and domestic economy. The Bank of England has already signalled that future interest rate cuts are now less likely, and inflation will be higher than expected. The disruptions to the transportation and supply of energy are pushing up fuel and utility prices and companies’ costs.
It remains to be seen whether investors will continue to back growth capital transactions at the rate they have in Q1, or whether activity will now pause, while everyone awaits the impact of this unrest.
According to our research into UK private companies raising between £1 million and £20 million of growth equity capital each, 259 UK businesses raised a total of £1.281 billion in the first quarter of the year. The average deal size was £4.94 million.
Our Q1 2026 figures reveal a 20% increase in the number of deals completing, and an 11% increase in the overall amount of growth capital being raised, next to Q4 2025’s 216 deals raising £1.154 billion. 259 deals in one quarter is the highest number we have recorded since Q2 2024, and £1.281 billion is also the highest amount of aggregate growth capital raised since that quarter. The average deal size of £4.94 million remains comparatively high, compared with the historical data. However, it is lower than most of last year, when fewer but larger deals came to the fore.
Later-stage VC deals were the most common in Q1 2026, accounting for 42% of all deals completed, and 48% of total funds invested. Companies with a proven track record, raising larger amounts of money, continue to have the edge over early-stage businesses, although we have also seen an increase in the number of successful seed rounds last quarter.
Quarterly number of deals and average deal size
Q1 2026 deal volume and value by deal type
Technology sector
The technology sector remained the top choice for investors, representing 44% of all transactions by volume and 51% by value in Q1. Technology deals are dominating in the UK because they sit at the intersection of the strongest structural growth trend (AI), the most scalable business models and a uniquely supportive ecosystem of government incentives, talent and capital formation that has recently re-accelerated. The UK can confidently state that it is Europe’s tech hub, with a tech ecosystem estimated to be worth c. £1 trillion.
Notable tech sector deals
In February, BeyondMath, a deeptech company that has developed a generative physics model, closed a $18.5 million fundraising led by Cambridge Innovation Capital, alongside existing investors, including Insight Partners and InMotion Ventures. Founded in 2022, BeyondMath has developed the world’s largest foundational physics model, which is capable of simulating complex physical phenomena, from aerodynamics to thermal management. Customers include automotive, aerospace and electronics manufacturers, as well as data centre designers and semiconductor manufacturers. Following this investment, BeyondMath expects to double its headcount this year and expand its customer base across Europe, the US and Japan.
In March, Maven completed a £15 million investment in Chorus Intelligence, a UK-based digital investigation software specialist, whose clients include law enforcement, government agencies and corporations. The transaction represents the fourth investment completed by Maven’s Buyout Fund II, which is targeting growth–focused UK businesses across the lower mid-market.
Q1 2026 deal volume and value by sector
Ryan Day, Head of Technology, Moore Kingston Smith
Trending: Healthcare
The healthcare sector was the second most popular with investors in Q1 2026, having been in third place in the previous two quarters. Healthcare deals accounted for 19% of all transactions by volume, and 16% by value in Q1. Healthcare likely moved into second place because it offers a combination of defensive demand and structural growth, which is attractive in a still-uncertain macro environment. At the same time, the sector is benefitting from AI-driven innovation, particularly in healthtech, which is drawing in tech-focused investors. In the UK, additional tailwinds such as NHS pressure and government support for life sciences are also creating more investable opportunities, while a backlog of more complex deals may have led to a spike in Q1 completions.
“UK healthcare is attractive because it combines predictable demand, government-backed revenue drivers through the NHS, and clear value creation strategies like consolidation and operational improvement.”
Tabitha Hyde, Corporate Finance Associate Director, Moore Kingston Smith.
Notable healthcare deals
In March, Manchester-based pharmaceutical research, development and manufacturing business, Seda, announced it had raised £15 million of growth capital from BGF. The investment will be used to expand its manufacturing capabilities and to launch into new markets.
Also in March, University of Edinburgh healthtech spin–out Bioliberty announced it had secured £6.2 million of Series A funding, in a round led by Scottish National Investment Bank, with participation from existing investors, including Archangels. Bioliberty is a rehabilitative robotics company. The first application of its technology is a robotic glove that allows patients and clinicians to track hand rehabilitation progress post trauma and stroke.
Active investors
Scottish Enterprise and Haatch tied for first place in our most active investor table in Q1, with the completion of eight transactions each.
Scottish Enterprise’s investments in Q1 included:
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- contributing £5 million to the £16.23 million funding round for Celtic Renewables, a Scottish green chemicals firm.
- investing in a £6 million funding round, led by PXN Ventures, into Earth Blox, an Edinburgh-based technology company helping organisations understand how nature loss and climate hazards affect financial performance.
- participating in a £2.5 million seed investment round into University of Glasgow spin-out quantum hardware company Quantcore.
- investing in a £1.6 million seed round into TileBio, a start-up which has developed an AI-driven platform that increases the speed and accuracy of life-saving cancer diagnosis.
Haatch’s Q1 investments included:
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- participating in a $7 million fundraising into VerbaFlo, which aims to enable real estate owners and operators to automate leasing, operations and resident engagement through conversational AI.
- investing in a £2.4 million seed round into Made With Intent, a Liverpool-based ecommerce start-up.
- leading a $1 million pre-seed funding round for Dataline Labs, a London-based AI data analysis company.
Q1 2026 top investors
Outlook
2026 has got off to an excellent start, with more deals completing in Q1 than we have seen in any quarter in the last couple of years. However, while we originally expected a benign environment for deal-doing to persist throughout 2026, the Middle East conflict changes things, and the question remains as to how extensive its impact will be. We have already seen oil prices surging above $110 a barrel, driving inflation fears and delaying rate cuts. The IMF has warned of higher prices and slower growth globally, and the OECD expects the UK to be one of the hardest-hit developed economies.
For the rest of 2026, the UK growth capital market is likely to become more selective rather than materially weaker. While underlying drivers like AI and healthcare requirements should sustain deal activity, the Middle East situation introduces inflationary pressure, tighter financing conditions and slower UK growth. This may lead to a two-speed market, where high-quality, mission-critical businesses continue to attract capital, but more cyclical or lower-growth assets struggle to get funded or face valuation pressure.
“There is still plenty of dry powder within the UK’s growth capital market, and there are strong pipelines, especially in tech and healthcare, so we expect deal volumes to remain relatively stable. However, if financing becomes increasingly constrained, as credit becomes more expensive, we will see fewer marginal deals get done and a much higher bar for quality.”
John Cowie, Head of Growth Capital, Moore Kingston Smith
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Methodology
Moore Kingston Smith has analysed transactions by UK-based companies that involve the issue of less than 50% of equity share capital to third parties and funds raised of between £1 million and £20 million. Accordingly, these numbers do not include senior debt and mezzanine debt fund raisings and smaller fund raisings by companies and start-up funding unless more than £1 million is raised. Start-up funding is generally significantly less than this amount.
The research aims to capture all transactions by UK companies that fall within the criteria. Inevitably there will be transactions that have taken place but have not been captured. The research is based on data extracted from Pitchbook.
