Venture capital investment into the South West’s start-up and scale-up businesses rose by nearly a third in the second quarter of this year, bucking the national trend, according to a new report.
Some 21 investments were concluded in the region during the period compared to 15 in the previous three months.
The total raised was £37.9m against £29.3m in the first three months of the year – an increase of 29%.
The results appear in the latest KPMG Private Enterprise Venture Pulse report, which says they highlight an increased appetite among VC investors to support the South West’s burgeoning start-up community.
The standout raise came from Portishead-based Q5D, an automated wire harness manufacturer, which secured £10.1m to further develop its robotic systems that automate product electrification and reduce wiring assembly bottlenecks for major manufacturers.
Other deals during the period targeted start-ups in clean technology, advanced manufacturing, life sciences, defence and artificial intelligence – all sectors at the heart of the UK Government’s Industrial Strategy.
David Williams, KPMG UK’s office senior partner for the South West, said: It’s encouraging to see the South West’s start-up community staying resilient amidst a backdrop of slowing deal activity across the UK.
“There’s real momentum behind the region’s future-focused businesses – especially in clean tech, advanced manufacturing and AI.
“These companies aren’t just attracting investment, they’re helping to drive the UK’s next wave of high-growth industries and cementing the South West’s role as a centre for innovation.”
Nationally, the UK suffered its slowest quarter of venture capital (VC) investment in five years despite a surge in interest in the artificial intelligence (AI) sector.
Levels of investment dropped to £2.6bn across 435 deals in the second quarter of 2025 – down from £3.8bn in the first quarter across 507 deals – as a result of a pullback across corporate VC activity.
However, AI remained a dominant investment theme alongside the areas of health, tech and fintech with megadeals during the quarter including £251m for EV charging firm Believ (London), cloud computing business XY Miners (Brighton) securing £223m, and £148m for health tech firm CMR Surgical (Cambridge).
This meant that, despite the overall downturn, the UK secured three of the top 10 deals across the whole of Europe.
Looking ahead, the report VC investment levels were expected to remain subdued in the third quarter due to uncertainty caused by fluctuating tariffs being imposed by the US.
However, tech investment is set to remain high as AI continues to be the focus for investors in the UK and further afield.
Nicole Lowe, UK head of KPMG’s emerging giants practice, said: “While quarter two marked the slowest quarter for UK venture capital since early 2020, the long-term outlook remains strong, particularly in AI.
“We’re seeing growing confidence from investors in the UK’s innovation ecosystem, and the government’s significant AI-focused commitments, including job creation and infrastructure investment, signal a clear intention to position the country as a global leader in next-generation technologies.”