Scaling Our Spinout Ecosystem
•February 16, 2026
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Companies Mentioned
Dealroom.co
Why It Matters
Retaining and scaling world‑class spinouts is vital for the UK’s economic growth, sovereign technology capability, and high‑skill job creation.
Key Takeaways
- •UK spinouts raised $19.2B VC, Europe's largest ecosystem.
- •Scale‑up capital shortage pushes firms to relocate abroad.
- •Founder tax and visa policies deter global talent.
- •Public procurement favors large firms, limiting SME growth.
- •Accelerated pension fund deployment could fund scaling now.
Pulse Analysis
The United Kingdom has built a formidable reputation for translating academic research into commercial ventures, with more than $19 billion of venture funding funneled into spinouts since 2020. This capital influx places the UK ahead of most European peers, yet the ecosystem still trails Silicon Valley in the critical phase where startups transition to mature, revenue‑generating scale‑ups. Investors increasingly cite a thin pool of domestic growth capital as a decisive factor when evaluating whether to stay or seek funding abroad, underscoring a structural gap between early‑stage financing and later‑stage expansion.
Compounding the capital shortfall are policy levers that influence founder decisions. While the Mansion House Accord and recent pension‑scheme legislation aim to unlock institutional money for high‑growth ventures, actual deployment remains sluggish. Simultaneously, tax incentives such as the Enterprise Management Incentive (EMI) have been doubled, but founders argue that the overall tax framework—including Business Asset Disposal Relief limits and restrictive founder‑visa durations—still lags behind competing jurisdictions that offer more generous reliefs and longer residency rights. The talent pipeline, essential for deep‑science companies, is therefore vulnerable to global mobility trends.
A third, often overlooked, lever is public procurement. In the United States, government agencies act as early customers, providing validation and cash flow that bridge the gap between research grants and commercial sales. The UK’s NHS and Ministry of Defence could play a similar role, yet current procurement processes favor large, established firms, leaving innovative SMEs on the periphery. By redesigning procurement criteria to prioritize cutting‑edge spinouts and by ensuring pension funds are swiftly directed into growth‑stage investments, the UK can transform its spinout success into sustained, sovereign economic power. Addressing these three pillars—capital, talent, and procurement—will determine whether the UK remains a global magnet for science‑driven entrepreneurship.
Scaling our spinout ecosystem
The UK is a global powerhouse in spinout creation. A recent report by Dealroom found that UK spinouts have raised over $19.2B in VC funding since 2020, making it the largest ecosystem in Europe.
But we are also seeing an exodus of these high-potential UK companies overseas. The UK’s challenge is not creating world-class science and technology companies; it is building the environment in which they can scale and remain here. To turn our research excellence into a driver of economic growth and national resilience, we must, as a matter of urgency, improve that environment.
There are three areas holding the spinout ecosystem back, where government has the power to make a meaningful difference.
A strategy for scale
The UK has a robust early-stage funding environment, but high-potential companies face a scarcity of UK-domiciled scaleup capital as they mature. To keep our most advanced companies anchored here in the UK, we need to mobilise domestic growth capital and make scaling in the UK cities as attractive as it is in Silicon Valley.
The Mansion House Accord and Pension Schemes Bill are significant steps forward, making UK taxpayer-funded investment in venture builders like OSE and UK science companies possible.
This intention is good, but it is failing to translate into meaningful deployment of pension capital into the innovation ecosystem. At the current pace, we are decades away from the full realisation of the Mansion House vision. We need that capital flowing now.
A preferred destination for entrepreneurs
Second, deep science companies require proven leadership with specialised experience, which invariably needs to be drawn from overseas because of the limited pool of home-grown talent.
HM Treasury’s consultation on tax support for entrepreneurs is examining the right issues to address, but its examination needs to be conducted through the lens of global, highly mobile founders, who have an increasing number of countries offering them incentives to build their companies in their region.
While the UK has many strengths, the tax treatment of founders is increasingly seen as a disincentive to even consider it as a place for establishing and scaling world-leading ventures.
The doubling of EMI limits from April helps, but bolder steps are needed, including increasing the Business Asset Disposal Relief back to, or above, its previous level of £10m; and adapting founder visas to allow them to stay here for a timeframe that equates to the time it takes to build a company (20 years) with exemption from inheritance tax on their global assets for that period.
Targeting public procurement
Finally, we need to get better at orienting public procurement towards our most valuable innovation-leading SMEs.
In the US, the government acts as a first customer, validating the science and providing the early revenue that bridges the gap between research funding and commercial rollout. The UK government, especially the NHS and the MoD, has an opportunity to be much bolder in using its procurement as a tool to help cutting-edge UK companies make that step and anchor them here.
Last year’s Industrial Strategy shows government is starting to treat spinouts as a strategic lever, but the system is still biased heavily in favour of the large companies with the resources and balance sheet to ride out the extended and torturous process of selling into government.
This pushes the innovation-leading SMEs, the companies we can least afford to lose if we’re to build sovereign capabilities, to the US, where market entry is faster and lower risk.
The commitment to acting as an early buyer for AI and clean energy is a positive start, but we need to see government routinely procuring from our most promising UK companies across all of the pillars of the Industrial Strategy.
If we can address capital, talent, and procurement, we will ensure that the UK is not just the best place in the world to build world-leading science and tech companies, but also the place from which to grow and win internationally.
Read more: How the UK can build on its spinout success
The post Scaling our spinout ecosystem appeared first on UKTN.
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