UK’s Health Tech Sector Attracts Highest VC Investment in Q1 of 2025, HSBC Report Shows

Health tech is now the strongest sector for investment in Britain, UKTech News has reported. Recent research by the HSBC Innovation Banking and Dealroom shows that in the first quarter of 2025, UK health tech investments reached a high of $1.8 billion. UK health and life sciences startups attracted investments from venture capital firms.a

Innovation Powerhouse

The $1.8 billion invested by UK healthtech VCs in 2025 places health above sectors like fintech and software that are often preferred by venture capital firms. This is more than twice the amount raised by the second-placed sector. Both fintech and software raised about $742 million in quarter one of 2025.

“The UK remains Europe’s innovation powerhouse – driving revenue, producing more unicorns, and capturing a growing share of VC investment. With rising early-stage investment, fast-growing sectors, and standout IPO candidates, we’re excited to see what the rest of the year holds for the UK innovation economy and remain focused on supporting firms to accelerate growth across the ecosystem,” HSBC Innovation Banking UK CEO Simon Bumfrey said.

Funding rounds conducted recently in the health sector registered strong performance. These include Isomorphic Labs which raised a total of $600 million last month. Isomorphic Labs is an AI drug discovery startup founded by Sir Demis Hassabis.

Sir Hassabis also co-founded DeepMind. Another healthtech startup that has raised significant funding this year is Verdiva Bio. The UK life sciences startup that is developing a weight loss drug to compete with Ozempic raised $410 million in January 2025.

AI in Health Tech

Although health sector funding dominated quarter one of this year, significant investment went to startups that support NHS AI data integration and solutions. The HSBC report showed that close to 50% of VC investments in the health sector were directed to AI-powered startups. This investment trend underscores the growing influence of NHS tech innovation in healthcare.

“It’s exciting to see UK health tech firms thriving and attracting near-record investment, driven by AI innovations transforming the sector and unlocking exciting new possibilities. This is a testament to the resilience of the innovation ecosystem, which has weathered an uncertain operating environment to continue attracting investment,” Bumfrey added.
A big percentage of the successful funding rounds run by startups in quarter one of this year were Series B and C. These breakout stage funding rounds raised more than $1.8 billion while late stage rounds raised $1.7 billion. Mega funding rounds recovered slightly this quarter. The UK recorded more than six megarounds in quarter one. The country also registered the second-highest average deal size this quarter since 2020.

Overall, innovative businesses across the UK raised a total of $4.2 billion in the first quarter of 2025. This represents an 8% rise compared to the same quarter in 2024. It’s also the highest amount raised in the first quarter since 2022.

UK’s Position in Europe

The HSBC research showed that UK startups are increasingly pursuing alternative funding sources besides equity. In quarter one of 2025, debt financing rose to $1 billion, marking a sharp rebound from 2024’s second half.

The rise in debt finance also signifies renewed confidence among lenders. The UK ranks top in Europe in critical areas including overall enterprise value, number of unicorns, and venture capital investments. The country has produced 185 unicorns. This is more than any other country within Europe.

In quarter one of 2025, the country attracted more venture capital investments than Spain, France, and Germany combined. The UK also accounted for close to a third of all venture capital investment raised in Europe between 2020 and 2024.