Artificial intelligence accounted for a record 44% of UK smaller-business equity investment in 2025, according to the British Business Bank. Overall equity funding for smaller businesses fell 4% to £12.3 billion.

The bank’s Small Business Equity Tracker found that investors concentrated capital into fewer, larger transactions, with the 10 biggest fundraisings accounting for 23% of total investment, the highest share since 2020.

AI companies also made up 26% of all deals in the smaller-business equity market, almost double their share in 2022. Investment in AI-related deals rose 48% year on year, underscoring the sector’s growing influence on capital flows across the market.

The figures suggest larger AI transactions are offsetting weaker conditions elsewhere. That pattern continued into the first quarter of 2026, when a small number of AI megadeals lifted total investment even as funding conditions for smaller businesses remained subdued.

Early-stage pressure

Outside the biggest transactions, the picture was weaker for younger companies seeking capital. Seed-stage deals fell 27% in 2025, while venture-stage deals dropped 13%.

Growth-stage investment was more resilient, suggesting investors remained willing to back more established businesses while becoming more selective earlier in the funding cycle. Digital and Technology remained the largest recipient of equity investment overall.

Other sectors had a mixed year. Advanced Manufacturing recorded strong growth in investment value, while Financial Services and Life Sciences declined. Clean Energy and Creative Industries were broadly steady by investment level despite a fall in deal numbers.

Spinout activity

The report also highlighted the role of university spinouts in the UK funding landscape. Venture capital deal volumes for spinouts rose 95% in 2021-2025 compared with 2016-2020, outpacing the United States, Germany and France.

Measured against the size of the research base, the UK also had the highest number of venture capital-backed spinouts among those international comparators. This points to strong conversion of academic research into equity-backed companies, even as wider market conditions have become more challenging.

Yet the most recent year showed a slowdown. Equity deals involving UK spinouts fell 33% in 2025 and investment value dropped 51% from the previous year.

The British Business Bank supported a higher share of spinout deals than of the wider market. It backed 16% of spinout deals, compared with 12% across the overall market.

Regional shift

Investment patterns also shifted geographically. The North West recorded an 82% rise in equity investment in 2025, while Scotland rose 74% and the South West increased 104%.

Those gains were tied to a small number of large deals in AI and energy. London still accounted for the biggest share of UK equity investment, but its share fell to 57% in 2025 from 60% in 2024, indicating a modest easing of the capital’s dominance.

Between 2023 and 2025, the bank supported 15% of all deals and 16% of total investment, with a particular focus on innovation-led businesses, including AI companies.

That intervention is part of a broader investment push. After publishing its five-year strategic plan, the bank increased the pace of deployment with the aim of unlocking about £26 billion of private capital alongside £13 billion of its own funding over five years.

It is also deploying £4 billion to support businesses in the government’s eight industrial strategy sectors. Separately, it has committed £2.6 billion to back entrepreneurs across the UK, including through two new Nations and Regions Investment Funds.

A broader international comparison in the report found that UK venture capital investment overall was 32% lower than the US in 2023-2025 when adjusted for the size of the economy. The bank noted that the US figure was influenced by a small number of exceptionally large deals over the same period.

Leandros Kalisperas, Chief Investment Officer at the British Business Bank, said: “While we are seeing signs of the market cycle playing out, the British Business Bank is accelerating deployment of investment across the cycle, and ensuring promising businesses can continue to access the finance they need to start, scale and stay in the UK.

“The concentration of investment into AI highlights both the scale of the opportunity and the challenges within the wider market. Ensuring capital is available across sectors and stages will be critical to maintaining a diverse and competitive pipeline of UK companies.”

Michael Moore, Chief Executive at UK Private Capital, said: “The UK should celebrate the strength of our spinout ecosystem – outpacing the US, France and Germany is no mean feat, but it’s important that we build on this competitive advantage in years to come.

“The British Business Bank is playing an important anchor role in helping develop this ecosystem and growing an investor base of larger VC funds. Nurturing these start-ups and ensuring they can access the right capital at the right time will encourage more companies to scale and stay in the UK.”

SOFIAH NICHOLE SALIVIO

News Editor

Jitterbit has published research showing a divide between UK and US technology leaders over whether to buy or build AI agents, highlighting a split in enterprise preferences for agentic automation.

Its data shows that 51% of UK organisations prefer pre-built agents for building and deploying AI agent automations, while 48% rely on custom-made systems. In the US, the pattern is reversed: 55% of respondents favour custom-built code developed entirely in-house, while 45% lean toward pre-built agents.

The figures come from Jitterbit’s 2026 AI Automation Benchmark Report, which examines how IT decision-makers are approaching AI and automation. It suggests UK companies place greater value on speed and efficiency than on bespoke development as they expand their use of AI agents.

Among UK respondents, 43% preferred agents embedded in pre-built software-as-a-service applications. By contrast, 28% preferred building their own low-code or no-code integration platforms, while 20% favoured in-house custom-coded agents built through tools such as Lovable or similar services. Only 8% chose off-the-shelf agents as their primary source.

Cost pressure

Jitterbit linked the strategic divide to the changing economics of AI deployment, arguing that rising token costs and heavier use of large language models are making bespoke development less attractive, particularly for companies weighing the ongoing cost of maintaining internal systems.

This reflects a wider market concern over the total cost of AI projects. Many companies have invested heavily in internal engineering teams and AI experimentation, but spending on inference, integration and model usage has become a more visible budget issue as projects move into broader business use.

The report also found that 81% of organisations plan to increase funding for AI and automation over the next 12 months, suggesting demand remains strong even as businesses become more selective about deployment and expected returns.

Build or buy

The contrast between the UK and the US also points to different corporate cultures around software development. US engineering teams appear more willing to keep AI agent development in-house, while British organisations show greater readiness to adopt pre-built options from software vendors.

The distinction matters because AI agents are moving from pilot projects into mainstream operational tools. Companies are using them for process automation, application integration and task orchestration, so decisions on whether to build internally or buy ready-made systems can affect budgets, deployment times and the level of technical oversight required.

Pre-built systems can offer faster implementation and more predictable supplier support, while custom builds can provide greater control over workflows and internal data handling. The findings suggest this trade-off is becoming sharper as AI consumption costs rise and boards demand clearer evidence of value.

For UK businesses, the research indicates that caution over custom development is not simply technical conservatism. It also reflects a pragmatic response to the pressure of deploying AI tools at scale without taking on open-ended costs tied to internal development and token use.

Bill Conner, president and chief executive officer of Jitterbit, said the market is moving into a new phase as AI projects become more integrated into core operations.

“We are moving past the era of siloed AI experimentation and entering the era of pure orchestration,” Conner said.

He said economic pressure is reshaping how companies assess custom systems against pre-built alternatives.

“The market is waking up to the true total cost of ownership of custom AI. Between developer bottlenecks and soaring token costs, building everything from scratch is a luxury few can sustain. The UK’s slight preference for pre-built applications may have previously been considered cautious, but it’s proving to be highly strategic as economic pressures force a shift from development to intelligent integration,” Conner said.

Vercel has signed a multi-year partnership with the Mercedes-AMG PETRONAS Formula One Team, linking the technology company with one of Formula One’s most prominent teams.

Under the agreement, Vercel branding will appear on the team’s race cars, and the two organisations will work on digital experiences, customer engagement and content. The deal also includes plans to move Mercedes-AMG PETRONAS digital platforms to Vercel.

The partnership goes beyond branding and marketing into technical work on the team’s online presence. It covers global branding rights and hospitality, as well as product and platform development tied to fan, customer and partner interactions.

Mercedes-AMG PETRONAS has built one of the largest commercial and sporting profiles in Formula One, making team partnerships an attractive route for technology companies seeking global visibility. For Vercel, the tie-up places its name in a sport that has become a significant platform for business-to-business networking and international consumer marketing.

Digital focus

A central part of the agreement is the planned development of Mercedes-AMG PETRONAS’s digital platforms with Vercel. That points to a relationship aimed not only at sponsorship exposure, but also at practical involvement in how the team manages websites, digital products and online content.

Vercel is best known as the company behind Next.js, a web development framework widely used by software teams building websites and applications. In recent years, it has expanded its pitch around infrastructure for AI-related software and tools that developers use to build and deploy digital services.

That technical positioning helps explain why the partnership has been framed around speed, engineering and optimisation, themes closely associated with Formula One. Motorsport teams increasingly present themselves as technology businesses as well as sporting organisations, and commercial partnerships often reflect that blend.

Richard Sanders, Chief Commercial Officer of the Mercedes-AMG PETRONAS Formula One Team, described the rationale for the deal in terms of shared priorities.

“Formula One is where every millisecond matters, every decision counts, and continuous innovation is fundamental to success. Vercel shares that same philosophy,” Sanders said.

“The Vercel platform is helping organizations around the world build faster, perform better, and innovate with confidence. We are excited to welcome Vercel to the Mercedes-AMG PETRONAS Formula One Team and look forward to building a partnership that delivers value both on and off the track,” he added.

Commercial reach

The agreement reflects Formula One’s widening appeal to technology companies looking for both brand recognition and commercial access. Teams now sell sponsorship packages that combine logo placement, hospitality, customer events, executive access and collaborative technology projects.

For Mercedes-AMG PETRONAS, the deal adds another technology partner to a roster that has long included companies involved in software, data, engineering and communications. Such relationships can help teams support internal operations while also broadening sponsorship income.

For Vercel, the partnership offers a chance to present its products to business customers through a sport that increasingly attracts senior executives, software buyers and corporate partners. Formula One has become a venue where companies blend traditional sponsorship with business development and customer relationship activity.

Guillermo Rauch, Founder and Chief Executive Officer of Vercel, drew a direct comparison between motorsport and software delivery.

“Speed wins. It’s true on the track, and it’s true on the web,” Rauch said.

“Mercedes-AMG PETRONAS is one of the fastest teams in world sport, and we’re proud to support a team that shares our obsession for engineering excellence and relentless optimization,” he added.

Rauch also gave a separate short statement as part of the announcement.

“If it’s fast, it’s on Vercel.”

Mercedes-AMG PETRONAS employs more than 2,000 people across its Brackley and Brixworth operations in the UK and remains one of the most successful teams of the modern Formula One era, having won eight consecutive Constructors’ Championships from 2014 to 2021.

Vercel says its platform is used by OpenAI, Ramp, Supreme and millions of developers, underscoring its ambition to be seen not only as a web infrastructure provider, but also as a company serving the growing market for AI-related software development.

The combination of visible car branding and back-end digital collaboration shows how Formula One sponsorships are evolving from straightforward advertising into broader technology and commercial agreements. In this case, the clearest operational element is the plan to develop the team’s digital platforms with Vercel.