Kanishka Narayan, UK’s Minister for Artificial Intelligence
Hindustan Times/Getty Images
AI is dominating the UK’s venture market this year at the expense of its legacy verticals.
Investment in UK startups totaled £14.4 billion (about $19.4 billion) in the first half of the year, according to PitchBook’s 2026 UK Private Capital Breakdown, already reaching almost three-quarters of last year’s deal value.
Of that deal value, more than 70% has been directed to AI startups. Almost 40% of overall European AI funding was claimed by UK startups in H1.
The UK has made AI central to its growth plans, with startups a key part of that strategy. In April, the government launched a £500 million sovereign AI fund, which has already backed companies such as AI lab Ineffable Intelligence and drug developer Isomorphic Labs.
In June, the government announced a £1.1 billion AI hardware plan to back companies developing chips and semiconductor technologies, including startups such as Olix, which received funding from the Sovereign AI fund and recently raised a $312 million Series B, and Fractile.
New Prime Minister Andy Burnham’s team is looking to overhaul the country’s AI strategy, the Financial Times reported, with a focus on tech sovereignty and on appointing Kanishka Narayan as the UK’s first dedicated AI minister.
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The wave of funding going to AI has left many other sectors bereft of capital, including historical mainstays such as fintech. According to the Breakdown, funding for the latter had not even reached £1 billion by the end of June and is currently pacing 75% below last year’s total. Mobile, which in previous years ranked third by annual deal value, is also tracking around 80% below historical norms.
The UK’s heavy skew toward AI raises concerns about concentration risk, particularly because much of the funding is focused on just a handful of companies. Almost 60% of H1’s overall deal value came from just 18 deals, despite more than 1,100 rounds closing. Nine out of 10 of the largest deals were for an AI startup.
Concerns are already mounting in the public sector about the sustainability of AI spending and the pace of corporate adoption. If a market correction were to occur, the UK’s ecosystem would be heavily affected.
This article originally appeared on PitchBook News
