Early-stage investment in UK cleantech falls

New data has revealed that early-stage investment in UK cleantech firms has fallen sharply over the past year. Research from Cleantech for UK finds that Seed and Series A deal activity fell by 50 percent in 2025, with just 94 deals made, the lowest level figure since before 2020[i].

In terms of total value, Seed funding fell from £314 million in 2024 to £144 million last year- a 54% decline, and Series A funding contracted from £710 million to £366 million, a 48% decline. Capital-intensive industries, such as hardware and infrastructure-heavy technologies, were the most affected as investors preferred safer bets such as software and late-stage companies[ii].

However, total investment in the UK cleantech sector increased markedly- up from £5.6 billion in 2024, to £7.2 billion in 2025. The researchers highlight that composition of investment shifted decisively toward non-dilutive capital. Debt financing for example surged to £2.7 billion, its highest level on record and representing 38% of total investment compared to just 28% in 2024. The report authors claim that this reflects both the maturation of deployment-ready technologies and the rising cost of equity capital in a higher interest rate environment.

The researchers argue that the challenges facing early-stage investment in the UK have become increasingly pronounced, with the so-called ‘valley of death’ for projects remaining a critical constraint. As such a ‘triple squeeze’ of factors have been blamed for the decline; this includes high industrial energy prices, higher interest rates which in turn are driving market uncertainty and reducing the appetite for risk, and the closure of the Net Zero Innovation Portfolio without a successor.

Sarah Mackintosh, director of Cleantech for UK, has been quoted as saying: “The UK has proven its global resilience, outperforming China, France, and Germany in venture-backed investment and reclaiming its spot as Europe’s clean tech powerhouse. However, this £7.2bn recovery is a ‘Hollow Peak’ – while the top-line figures look strong, they mask a retreat into ‘safe bets’.”[iii]

She adds: “Capital is concentrating in software and late-stage companies, while the hardware-heavy startups that form the backbone of our future industrial strategy are being starved of oxygen.”[iv]

Energy & power firms dominate investment

The energy and power sector dominated investment in 2025, raising £1.2 billion compared with £1.0 billion in 2024, showing continued investor confidence in the sector despite broader market headwinds. Materials and chemicals emerged as the second-largest recipient of investment, securing £583 million in 2025 compared to £380 million in 2024. This 54% increase suggests growing recognition of the critical role advanced materials play in the energy transition, from battery technologies to sustainable construction materials.

Amongst the standout deals were a £750 million raise by Kraken (the AI technology platform set to be spun-off by Octopus Energy Group), a £130 million round for energy infrastructure specialist Highview Power, and £100 million each for EV charging company Gridserve and commercial fleet infrastructure provider Aegis Energy.

References

[i] Cleantech for UK — How to fast track deployment to meet the UK's 2035 goals

[ii] Cleantech Investment Report 2025

[iii] UK leads Europe in clean tech funding, report finds - UKTN

[iv] Ibid

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