UK scale-ups continue to raise less capital than US peers, but pension funds and asset managers say new vehicles are emerging to bridge the £50m-plus funding gap.
The UK’s long-discussed scale-up funding gap was back in focus at Private Markets Profile’s Inside the Deal conference yesterday, but the tone was notably more constructive than in past debates.
Panellists agreed that the UK is producing world-class innovation — particularly in deep tech, clean tech and life sciences — yet still struggles to provide domestic companies with the institutional-scale capital needed to fund growth rounds. The difference versus the US is stark.
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“If you chart the journey of a UK startup, it will raise roughly half as much capital as its equivalent US counterpart,” said Ian Connatty, managing partner at British Business Bank. “That gap grows as the company gets bigger.”
The result is not necessarily a shortage of early-stage capital, but a structural weakness in later-stage funding. Connatty argued that while some UK companies can access global pools of capital, others raise smaller rounds than required — particularly in more capital-intensive sectors — and a third cohort does not pursue scale capital at all because it is perceived as unavailable.
“The key to generating unicorns that is this whole scale-up case. It all collapses down to that,” he said.
L-R Sir Nicholas Lyons, Heather Coulson, Ian Connatty, Julie Diaz and Richard Moon (chair)
Julie Diaz, head of UK productive assets at Railpen, echoed the diagnosis. The UK venture ecosystem has matured significantly, she said, supported by British Business Bank initiatives over the past decade. But scale remains the constraint.
“The growth and scale-up capital isn’t there as it stands,” Diaz said. “The lack of funds that have enough scale to be able to invest £50–100 million in these funding rounds… that really is an issue.”
Without funds gaining critical mass, companies can spend 18 months assembling funding syndicates or ultimately sell to overseas investors. “If you are to price and lead rounds and guarantee these companies certainty of funding, you really do need that critical mass,” she added.
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Other asset owners, however, signalled that the institutional response is beginning to evolve.
Heather Coulson, head of portfolio management and implementation at Scottish Widows, pointed to the recent launch of its lifetime investment DC proposition, which includes private markets exposure through a long-term asset fund (LTAF). “We’re at the start of our journey,” she said. “There’s a number of very interesting UK Inc opportunities, and we will be allocating to them.”
She acknowledged that transmission mechanisms still need refinement. “[When] the right vehicles are available out there, it’s about putting them into play,” Coulson said. “They’re not there yet, but it feels like we’re on the cusp of them being created.”
For Sir Nicholas Lyons, chairman of Phoenix Group, building scale is central. Phoenix has partnered with Schroders to launch Future Growth Capital, targeting £2.5 billion by 2027. The aim is to accelerate deployment ahead of the 2030 DC private markets targets.
“The opportunity is there,” Lyons said. “The biggest, most successful investors in this space love UK opportunities. They have consistently come here and invested heavily.”
But he cautioned that policy also plays a role. “Government spends £300 billion a year procuring goods and services. There is nothing in the procurement rules that in any way favours UK companies,” he said, arguing that demand-side reform could help deepen domestic markets.
Despite structural hurdles, the panel’s consensus was clear: the UK does not lack innovation. It lacks coordinated scale. As larger vehicles emerge and pension capital edges into later-stage private markets, the long-standing scale-up debate may finally be moving from diagnosis to design.
Inside the deal: Antin Infrastructure Partners
Infrastructure investors continue to target digital connectivity assets as demand for high-speed broadband expands, with fibre networks seen as a core component of the UK’s digital infrastructure buildout.
Speaking at the event, Assia Belkahia, partner at Antin Infrastructure Partners, presented the firm’s investment in CityFibre, a wholesale fibre network operator positioned as a national alternative to BT’s Openreach network.
CityFibre provides full-fibre connectivity to internet service providers including Sky, Vodafone and TalkTalk. The wholesale model allows multiple retail providers to operate on the network, offering an alternative to vertically integrated telecom operators.
Since Antin took the company private in 2018, the investment has focused on scaling the network’s footprint and commercialising its infrastructure. The company has expanded from around 40,000 premises passed at acquisition to approximately 4.7 million today, with a target of reaching 8 million homes – roughly 30% of the UK market.
Belkahia said the strategy has centred on building scale and attracting major retail partners. The network currently connects around 900,000 customers, representing penetration of roughly 20% of the footprint, with some local areas reaching more than 40%.
During the discussion, Mike Weston, independent trustee at Pi Partnership, asked how investors assess the risk that fibre infrastructure could eventually be displaced by new technologies. Belkahia argued that fibre networks are likely to remain central to broadband infrastructure because they can accommodate significantly higher speeds through periodic technology upgrades. “Our network today is 10GB enabled… and can scale further through refresh cycles,” she said.
Mark Hedges, trustee chair of the Nationwide Pension Fund, questioned whether market consolidation could attract regulatory scrutiny as CityFibre seeks to expand through acquisitions. Belkahia said the company operates an open-access wholesale model and is part of a broader effort to create competition with the UK’s existing national networks.
While the investment has already been held for several years, Belkahia indicated that Antin expects to maintain a longer ownership period as the network continues to scale and penetration increases. Potential exit routes could include sales to long-term infrastructure investors or an eventual public listing once the UK fibre market structure becomes clearer.