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From innovation to scale: why UK growth companies need capital across the funding continuum
Adam McConkey
Head of 1798 Volantis Team
Alex Kirke, CFA
Portfolio Manager and Product Specialist, 1798 Volantis
Ritesh Bamania
Head of UK and Ireland Institutional Clients and Solutions
Claudia Ziebart
Institutional Client Director, UK and Ireland
key takeaways.
Early-stage funding is relatively well developed in the UK but many businesses struggle to access the domestic growth capital needed to expand and compete globally
Institutional investors have a key role to play across the funding continuum. Supporting innovation requires funding at every stage of a company's development, with particular attention to later-stage growth capital
By backing scaling businesses through quoted growth markets and specialist strategies, investors can access long-term growth opportunities while helping retain more of the value created by British innovation within the UK.
Supporting the next generation of UK growth companies
The UK has built one of the world's leading innovation ecosystems. Its universities, entrepreneurial culture and venture capital market have created a strong pipeline of high-growth businesses. Yet while the UK excels at creating companies, it has been less successful at helping them achieve global scale.
Growth capital in the UK is funding that helps businesses with proven commercial traction expand, scale operations and compete in larger markets. Scale-up funding is one part of this wider funding continuum, which also includes venture capital and quoted growth markets.
Recent initiatives, including the Mansion House Accord and the UK Scale-Up Fund, reflect growing efforts to channel more pension fund capital towards productive investment to support the next generation of UK growth companies. However, strengthening the UK's innovation economy requires more than simply increasing allocations to venture capital. It requires a funding ecosystem that supports businesses throughout their entire growth journey.
If the UK's ambition is to build globally significant businesses, improve retirement outcomes and maximise the value generated by British innovation, supporting the start of the journey is not enough.
Mind the funding gap
Much of the current discussion around supporting UK growth companies focuses on venture capital. While venture funding remains essential, it represents only one part of a successful capital ecosystem.
Companies require different forms of financing at different stages of development: a healthy continuum extends from venture capital and growth equity through to quoted growth markets and larger public-market ownership.
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The greatest challenge in the UK funding landscape lies further along this journey. As businesses move beyond the start-up phase, they often require larger and more patient pools of capital to scale operations, expand internationally, increase capacity and establish market leadership. This is the stage where much of the economic value created by innovation is realised. Companies that successfully scale can generate employment, improve productivity and create long-term shareholder value.
A shortage of later-stage funding from institutional investors, particularly on UK quoted growth markets, has contributed to weaker IPO activity and follow-on fundraising in recent years. For example, in the first half of 2026, about USD 770 million was raised in new issues on the London Stock Exchange, compared with USD 129 billion on Nasdaq.1
Fig 1. Capital raised on the FTSE AIM All Share Index2
As a result, companies often turn to overseas investors, pursue foreign listings or become acquisition targets before reaching their full potential. While these routes can provide access to capital, they also increase the likelihood that future value creation accrues outside the UK rather than supporting domestic economic growth and capital markets.
The case for growth capital
In our view, addressing this shortfall should be a priority for institutional investors such as UK pension funds.
Quoted growth companies on the FTSE AIM All Share Index (AIM) and the Aquis Growth Market occupy a critical position in the funding continuum, offering investors exposure to businesses that have already demonstrated commercial traction while still requiring capital to fund innovation, expand capacity and accelerate growth.
“Quoted growth companies on the FTSE AIM All Share Index and the Aquis Growth Market occupy a critical position in the funding continuum”
They provide an important bridge between venture-backed businesses and leading mature public companies. Without that bridge, the pathway from innovation to scale becomes fragmented.
For institutional investors, the opportunity should not be viewed as a choice between venture capital and quoted growth capital. Both are necessary. Focusing heavily on early-stage opportunities while neglecting later funding rounds risks creating bottlenecks that undermine the broader ecosystem.
AIM: a critical link in the UK's funding continuum
AIM is a national strategic asset, channelling capital towards innovative businesses across sectors including technology, life sciences, advanced manufacturing and clean energy. Historically the largest growth market for smaller companies outside the US, it has helped establish the UK as a global centre for innovation, entrepreneurship and capital formation.
According to Grant Thornton’s 2024 AIM report, AIM companies in 2023 contributed GBP 68 billion of gross value added to the UK economy, generated GBP 5.4 billion in corporation tax revenues and supported 780,000 jobs.
Yet domestic support continues to weaken. The Pensions Regulator’s 2026 master trust data shows that only 3% of disclosed default assets are invested in UK quoted equities, compared with 62% invested overseas.
Capturing more of the value created in the UK
The solution is not to prioritise one segment of the funding ecosystem over another. Venture capital, scale-up financing and quoted growth capital are complementary stages of the same funding continuum. Supporting each stage would strengthen capital formation, improve liquidity and productivity, and increase the likelihood that successful UK businesses remain headquartered and listed in the UK.
For UK institutional investors, this is not simply a matter of economic policy but a compelling investment opportunity: by backing companies as they scale, investors can participate more fully in the value created by British innovation while helping to ensure that more of that value remains within the UK economy.
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Growth capital provides funding to businesses that have already demonstrated commercial success and are ready to expand. It supports companies as they scale operations, increase capacity, enter new markets and strengthen their competitive position. While venture capital helps create innovative businesses, growth capital enables them to accelerate growth and develop into larger, more established companies. By providing access to patient, long-term capital, growth funding helps UK businesses progress from early success to global scale.
The UK has a strong innovation ecosystem and venture capital market, but many companies encounter difficulties once they move beyond the start-up phase. As businesses seek larger pools of capital to fund expansion, international growth and market leadership, access to financing often becomes more challenging. A shortage of later-stage funding from institutional investors, particularly on UK quoted growth markets, has contributed to weaker IPO activity and follow-on fundraising in recent years. As a result, many companies turn to overseas investors, pursue foreign listings or become acquisition targets before reaching their full potential, meaning more of the value created by British innovation may accrue outside the UK.
Institutional investors, including pension funds, can support scale-up funding by deploying capital across the entire funding continuum rather than focusing solely on venture capital. This includes allocating to growth equity, scale-up strategies and UK-quoted growth companies. By providing capital to businesses at later stages of development, investors can help address funding bottlenecks, support company expansion and improve the ability of UK businesses to compete globally. At the same time, they can gain exposure to long-term growth opportunities created by British innovation.
Quoted growth companies occupy an important position between private growth businesses and mature public companies. Quoted on markets such as the FTSE AIM All Share Index and Aquis Growth Market, these businesses have often established commercial traction but still require capital to fund innovation, expand operations and accelerate growth. They provide investors with access to a critical stage of value creation, with institutional funding playing a crucial role in allowing these companies to continue scaling.
Quoted growth markets provide a bridge between venture-backed businesses and larger, established public companies. They allow companies that have progressed beyond the venture stage to access public capital while continuing to grow. This creates a more complete funding pathway, supporting businesses throughout their development rather than leaving a gap between private funding and large-cap public ownership. By connecting these stages, quoted growth markets help transform innovation into long-term economic value and support the development of globally competitive UK companies.
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[1] Source: London Stock Exchange and Nasdaq as of June 2026.
[2] Source: LOIM, London Stock Exchange as of September 2026.
important information.
For professional investors' use only
This document is a Corporate Communication for Professional Investors only and is not a marketing communication related to a fund, an investment product or investment services in your country. This document is not intended to provide investment, tax, accounting, professional or legal advice.
