UK surges ahead of France and Germany as Europe’s ‘innovation powerhouse’
HSBC Innovation Banking, a subsidiary of Europe’s biggest lender, hailed the UK’s enterprise value in its latest innovation report.
UK innovation firms raised £3.2bn of venture capital in the first three months of the year – an eight per cent increase from the first quarter of 2024.
The quarter attracted higher amounts of funding, with over six recorded megarounds and the second-highest average deal size since 2020.
Health ranked as the most funded sector, with its second strongest quarter on record. It more than doubled enterprise software, which came in second at £549m.
Megarounds from London-based Isomorphic Labs and Verdiva Bio at £455m and £312m bolstered the sector’s total.
This strengthened the UK’s lead over its European peers and cemented its position as the centre for such investment across the region. In the first quarter, the UK raised more than France, Germany and Spain combined.
Simon Bumfrey, chief executive of HSBC Innovation Banking, said: “The UK remains Europe’s innovation powerhouse – driving revenue, producing more unicorns, and capturing a growing share of VC investment.”
“With rising early stage investment, fast-growing sectors, and standout IPO candidates, we’re excited to see what the rest of the year holds for the UK innovation economy and remain focused on supporting firms to accelerate growth across the ecosystem.”
The UK’s innovation economy is worth £911bn, according to data from Dealroom.co cited in HSBC Innovation Banking’s quarter one report. Fintech made up a quarter of the figure at £219bn.
UK is top unicorn breeder in Europe
The report highlighted the UK has created 185 unicorns – a startup valued over £1bn – with two more added this year.
This has fostered a pipeline of staff alumni from some of the UK’s top unicorns now founding their own start ups.
Deliveroo, which reached unicorn status in 2017, has produced the highest number of 2nd generation start ups at 53. Revolut came in second at 46, followed by video game developer King at 41.
With 31 per cent of Europe’s unicorns, London is in prime position to secure some of the most anticipated IPOs.
Neil Shah, head of tech sector primary markets at the London Stock Exchange, said: “we’ve had the best start to the year since 2021, and we are encouraged by the IPO pipeline.
“Despite global market conditions, we are building on what is already a strong foundation of support for companies choosing to go public and a trusted exit platform for VC-backed businesses.”
The London Stock Exchange has suffered a torrid few years after 88 firms ditched their City listing in 2024 – the highest since 2009.
However, the number of fintechs waiting in the wings, including top names Monzo, Zilch and Starling, could help turn the tide for the embattled LSE.
The first quarter also saw venture capital activity shifted beyond London. Cambridgeshire and Oxfordshire emerged as investment hubs, raising £222m and £212m respectively.
Tom Wilson, partner at venture capital firm Seedcamp, said: “Alongside the stand out strength of London, itʼs also encouraging to see Cambridge and Oxford emerge as increasingly significant hubs, contributing meaningfully to overall funds raised — particularly in frontier areas like AI
drug discovery and semiconductors.
“While VC deployment remains measured, conviction is high where quality and technical edge meet market opportunities.”