This post is by Andrew Wordsworth, CEO and founder of Sustainable Ventures.
The UK is the world’s second-most advanced climate tech ecosystem, close behind the US. The sector is a rare engine of growth. Sustainable Ventures’ research with Barclays recently found that £15.5 billion in startup investment was secured from 3,300 high growth climate tech companies between 2020 and 2024. These companies support 72,000 jobs and account for ten per cent of all domestic growth stage funding. However, this success masks a regional imbalance.
London is a magnet for innovation and capital. But maintaining global leadership requires a nationwide strategy. The ‘hard’ tech required to decarbonise our economy is rooted in the UK’s industrial heartlands and this unique potential must be better harnessed to meet climate targets and maintain the UK’s standing in the global race for the green industries of the future.
The ‘hardware heavy’ industrial domains, like offshore wind, hydrogen and grid-scale storage, require the ports, factories and engineering testbeds found outside the M25. Wales and Scotland are already global centres for hydrogen and marine energy, and the West Midlands is successfully pivoting its automotive DNA to lead in electric vehicle batteries.
Despite this, a ‘valley of death’ persists, with nearly half of early stage climate tech firms in the North West, Yorkshire, and the West Midlands failing to progress beyond their first funding round. This isn’t a lack of talent, it’s caused by uneven access to the commercial networks and patient capital that we’ve identified as the ‘missing middle’ of climate finance.
To anchor the next generation of UK climate tech, the government and industry must move beyond grant support with a national strategy to boost regional connections and improve the flow of funding.
National and local government, alongside industry actors, should build out region specific plans, rooted in local specialisms and backed by public finance organisations such as the British Business Bank, the National Wealth Fund and Great British Energy. We believe a national network of climate accelerators and hubs should be developed to embed commercial expertise and leverage best practice to support companies.
Accelerators bridge the gap between regions and investment
Our research spotlights accelerators as the connective tissue of the green economy. These intensive programmes aim to scale up startups rapidly through mentoring, networking and seed funding. New businesses that participate report significantly higher average valuations than those that don’t.
Accelerators and growth partners like us at Sustainable Ventures bridge the gap between London’s capital and specialist regional infrastructure. By providing business support, we help to ensure a company’s engineering brilliance in the North or the Midlands secures institutional backing, enabling them to grow fast.
Participation in accelerators is strong in Scotland and Northern Ireland but much weaker in places like the North West and Yorkshire. Without a national network of accelerator hubs, regional growth is left to chance.
Examples show these climate tech hubs work. In Manchester, backed by Barclays and the Greater Manchester Combined Authority, we’ve transformed the historic Renold Building into a world-class climate tech hub. Companies like earth4earth, making carbon-negative bricks, and Wull Technologies, producers of sheep wool insulation, prove the North West can lead the world in sustainable materials and circular manufacturing. In Glasgow, our Powering the Future programme is filling a critical gap in the Scottish ecosystem with bespoke 1:1 business support and workshops.
Everywhere should be able to benefit from AI
Of the 36% of UK climate tech investment tied to AI in 2024, 96% went to software firms in the South East. Companies building the physical infrastructure for net zero received just four per cent. Failure to integrate AI into the UK’s regional manufacturing base risks locking in structural imbalance. Our research suggests AI for the hardware companies should be a national strategic priority, helping traditional engineering firms to optimise energy systems and speed up prototyping.
The UK has all the ingredients to lead the next wave of global innovation. Regional clusters are not a supporting act to London’s financial stage, they are the primary engine of the green industrial revolution. The question is whether the regions can be enabled to fire on all cylinders to build a more competitive, geographically balanced economy.
Photo by Mylo Kaye on Unsplash.
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