This is particularly concerning for the UK business and innovation landscape as entrepreneurs are seeking alternative sources of investment and support from overseas, particularly the US. Research from Dealroom found that last year 57% of global venture capital went into US startups, compared to just 4.8% of funding for UK startups over the same period. The recent £2.9bn purchase of Deliveroo – a UK-listed company – by DoorDash in the US is the latest example of this trend.

As the UK looks to boost economic growth and innovation, the government must support startups on home soil or risk pushing them overseas and missing out on huge potential. They can do this by leveraging the UK’s existing ecosystem, supporting innovation hubs which are vital in helping small businesses adapt and thrive by providing access to local funding, technical expertise, and talent networks.

A complicated VC landscape

Startups are facing a tough landscape with tax hikes, rising interest rates and President Trump’s ever-changing tariffs which could potentially hit the UK with a 50% import tax on steel and aluminium, up from 25% earlier this year.

As a result, many businesses are navigating this uncertainty by moving overseas where they can retain more equity and cut costs. In Q1 of 2025, only 82 companies completed Series A funding, compared to 120 in Q1 of 2024, hence posing significant long-term consequences for UK innovation and growth.

The UK is home to pioneering technology companies like DeepMind, Wayve, and Graphcore that are pushing boundaries. The main challenge holding us back from gaining more global recognition is access to finance and talent. US venture capitalists are more optimistic and risk-tolerant compared to UK investors, so it’s no surprise that UK startups are taking advantage of the global opportunities a US investor can offer.

But it’s more important than ever that we increase investment into thriving industries like AI, pharmaceuticals and manufacturing, to attract new investors, encourage capital and support, and create spaces where startups can develop and scale their ideas. Ultimately, we need to create a better environment where investors can back entrepreneurs for the long haul to truly see growth.

Widening access to talent and addressing the skills gap

The UK is home to some of the world’s top academic institutions and innovation centres, offering fertile ground for entrepreneurs to grow businesses and disrupt industries. In order to compete with global innovation hubs like Silicon Valley, we must maximise the potential of UK startups, and support small businesses by providing the ingredients they need to thrive.

One of the ways to do this is by increasing access to high quality talent. Startups are losing out to larger tech companies that offer higher pay and job security, but there is also a skills gap issue with 62% of organisations reportedly facing skills shortages, costing the UK economy an estimated £39 billion annually if left unaddressed.

The government aims to ease work visa regulations to increase access to global talent. However, innovation districts in the UK can offer startups a network of young talent and learning opportunities, helping them access a wider pool of qualified talent and support the recruitment process while upskilling hires, all on home soil.

Furthermore, the government’s plans to scrap funding for higher-level apprenticeships and invest £3 billion to create 120,000 new training opportunities at the lower-levels is part of a wider effort to enhance the skills of British workers’. However, we should provide opportunities for people of all ages and backgrounds to reduce the skills gap and prepare the next generation for the jobs of tomorrow. Re-training is equally important as upskilling and essential for growing innovative enterprises at home.

The North of England as a destination for startups

Innovation districts and startup hubs can utilise their regional specialisms to connect early-stage businesses with investors, mentors and educators. According to research by GoDaddy UK, 40% of areas with the fastest growth of startups and small businesses were in the north of England.

In particular, Manchester has a rich history of innovation dating back to the 18th century Industrial Revolution. It is home to some of the world’s biggest businesses including Microsoft, Amazon, IBM, and Google, as well as 10,000 digital tech businesses and SMEs, making it the biggest tech hub outside London and fastest growing tech city in Europe.

Innovation districts are an ideal environment with 30% less operational costs than London, to unlock the potential for growth across the country. The British Business Bank recently committed to investing £40m across the Midlands and north of England. This will help boost regional growth and employability beyond the South and Golden Triangle. While the government recognises the funding gap across the country, it needs to consider more targeted support for regional startup ecosystems beyond simply investing in new transport links.

To become a global superpower for innovation, the UK needs to create a better environment to support early-stage businesses, providing them with the ingredients needed to thrive here in the UK. Innovation districts and startup hubs play a vital role here, connecting startups with investors, business mentors, professional services and educators to foster home-grown entrepreneurs and innovations. By strengthening these networks, the UK can enhance its innovative strengths and avoid pushing businesses overseas.

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