Venture capital investment in Yorkshire firms sinks 72 per cent following 'outlier period', KPMG research shows

The war in Ukraine, high inflation and increasing interest rates were all cited as factors.

According to KPMG’s latest Venture Pulse report compiled by PitchBook, a total of £14.6 million was raised by Yorkshire businesses in the opening three months of the year, down from the £53.8 million raised in Q1 2022.

Across the region, Huddersfield raised the majority of investment over the period, amounting £4 million, closely followed by Leeds (£3.9 million) and Sheffield (£3.1 million).

Advanced manufacturing, health tech and software-as-a-service firms raised the majority of capital in the region.

At a national level, £2.9 billion was raised overall in the quarter, the lowest raised by UK businesses in the opening quarter of a year since 2020, and down 76 per cent on the £12.3 billion raised in Q1 2022.

Euan West, Office Senior Partner for Leeds at KPMG UK, said: “Following the pandemic, 2021 and early 2022 saw huge appetite for VC investment into UK innovation and fast-growth businesses, and it really was an outlier period. What we are starting to see now is VC investment starting to return to more normal levels, but being compounded by a challenging economic environment.

“This is not just an issue confined to the UK, as our data shows market uncertainty has seen VC investment plummet globally. However, the UK remains the innovation crown jewel of Europe attracting more VC investment than France, Germany and Spain combined in the opening of the year.

“Investor sentiment in the UK is starting to turn slightly with some cautious positivity that the worst of the market turbulence might be over. Yorkshire is home to critical, innovative sectors and is well positioned to take advantage of a return in investor confidence.”