UK regional VCT investment is gaining ground, with data pointing to a meaningful redistribution of equity capital away from London and towards the North West, Scotland and beyond. For investors managing a balanced portfolio through a Venture Capital Trust (VCT) wrapper, that shift raises questions about manager selection, geographic reach and the sourcing advantages that local networks can provide.
How the capital flows are changing for UK regional VCT investment
London’s dominance in UK smaller-business equity investment remains, but it is eroding. In 2024, the capital accounted for 60% of UK smaller-business equity investment; by 2025, that share had fallen to 57%. Over the same period, investment in the North West increased by 82% and Scotland rose by 74%, according to the British Business Bank, which notes that some of those regional increases were driven by a small number of large AI and energy deals.
The broader inward investment picture adds further weight to the regional story. According to the UK Department for Business and Trade, venture capital investment of £3,911 million landed in the 2025 to 2026 period. The North West recorded the most foreign direct investment (FDI) projects outside London in that period, with 115 projects creating 5,254 jobs. That is a level of activity that goes some way beyond a single-year statistical anomaly.
The sectoral composition of that investment matters for VCT analysis. Artificial intelligence accounted for 44% of all UK smaller-business equity investment in 2025, the highest share on record. The North East has been designated an AI Growth Zone, with plans for new data centres at Blyth and Cobalt Park. Greater Manchester is developing clusters in AI and cyber alongside established strengths in life sciences and advanced manufacturing. Clean energy and digital technology are building scale elsewhere in the North.
What this means for VCT manager due diligence
For a VCT investor, the question is not simply whether regional businesses are growing. It is whether a given manager has the networks to find those businesses at an early stage, before they reach the wider market. Venture investing is, at its core, relationship-driven. Connections with founders, universities, co-investors and local business communities are how managers source deals with the potential for strong risk-adjusted returns.
That sourcing advantage is harder to build at a distance. Historically, venture capital has been concentrated in London, which means regional deal flow has sometimes been underserved. As the British Business Bank data illustrates, that is changing. But change in the investment landscape does not automatically translate into manager capability. A regional allocation only adds portfolio value if the manager running it genuinely understands the local ecosystems they are investing in.
Devolution adds a policy dimension worth monitoring. John Healey, in his first major speech as chancellor, placed regional investment at the centre of the government’s growth agenda, including a new £150 million allocation for northern scale-ups and a roadmap towards greater fiscal devolution. Greater local control over funding has the potential to strengthen existing clusters and direct capital towards sectors where particular regions already hold an advantage. Advisers should be tracking where government money flows and which managers are positioned to access the businesses that follow.
The appropriate due-diligence questions for any VCT with a regional mandate include: where do deal opportunities originate, which geographies and sectors does the manager know well, and how does it gain access before companies reach the broader market? Track record in identifying businesses at the pre-market stage, and the depth of local relationships underpinning that record, should sit alongside standard assessments of capital preservation, drawdown risk and fee structure.
London will remain a substantial part of the UK venture market. But for a balanced portfolio built on reliable income and long-term capital growth, the case for assessing what a VCT manager knows about regional economies has strengthened considerably. With the government’s own inward investment statistics now confirming 115 FDI projects and more than 5,000 jobs created in the North West alone, the next stage of scrutiny for investors and their advisers is ensuring the managers they select have genuine presence in the places where growth is being built. Caroline Flagg, director of strategic partnerships at PXN Investments, frames it plainly: geographic reach, local networks and sourcing capability beyond London should now be core elements of any VCT manager assessment.
