An “extraordinary year” for UK deep tech

2026 is set to be a record year for investment in UK deep tech, according to the Royal Academy of Engineering (RAE). Its State of UK Deep Tech report, published this morning, predicts that if the year-to-date trend continues, total 2026 funding could hit £12.8bn – more than double 2025, and well ahead of 2021, the previous record year.

RAE defines deep tech as those companies building on the “fundamental principles of engineering and science to create novel solutions,” involving capital-, time- and R&D-intensive work. Areas of this field in which the UK has particularly strength, according to the report, include biotech and pharma, “techbio,” quantum, and AI.

Indeed, it is AI-related investment which is driving the year’s enormous investment growth, with funding for non-AI companies expected to remain “broadly in line with recent years.” But RAE suggests that treating AI as a wholly distinct category can obscure its cross-cutting role, given that it is being deployed in fields from robotics to drug discovery.

The amount of deep tech venture capital which goes to defence-related companies has also tripled from 2025 to 2026. Other fields which have greatly expanded the investment they attract include robotics and space.

The report’s analysis of the investment landscape also highlights the growing presence of the British Business Bank, which has participated in the most investment rounds of any fund. At 24 so far in 2026, this is already more than in any previous full year. Other important deep tech investors include Oxford Science Enterprises, Northern Gritstone, and Scottish Enterprise Growth Investments.

UKRI’s role

As well as equity investment, RAE also considers the complementary role of grant-making, emphasising the importance of grants in supporting R&D and early commercialisation without “diluting” ownership at an early stage. This has particular value in deep tech fields, given the long development timelines and the risk profiles involved.

Since 2020, startups in the UK deep tech space have received more than £1.8bn in grants, the majority through Innovate UK. It’s noted that while the overall value has remained broadly stable over the last few years, the number of awards has declined – in line, the report notes, with UKRI’s move towards fewer, larger awards. Innovate UK’s new approach is focused on industrial strategy areas, which likely signals further support for deep tech as compared to other business areas.

These changes “may concentrate funding around areas of strategic importance” and reduce the complexities around navigating the system – but they might also narrow the number of entry points for earlier-stage companies, the report cautions.

As well as the value and number of grants on offer, RAE also stresses that the conditions attached to grants are also important to consider. There is said to be a “particular gap” around capital equipment and facilities:

“Grant conditions can restrict expenditure on these assets, while equity investors may be reluctant to finance them because of their cost and risk. This can leave equipment, pilot lines and specialist facilities required to move from R&D towards commercial scale underserved by either source.”

The academy’s forthcoming Deep Tech Scaleup Infrastructure Review will explore the issues with infrastructure in greater depth.