The United Kingdom’s startup ecosystem witnessed a significant boost in 2025, particularly across the northern regions, as the government-backed Northern Powerhouse Investment Fund II (NPIF II) disbursed over £80 million to more than 200 startups in its first year of operation. This milestone demonstrates the fund’s growing impact and its role in leveling the economic playing field across the country.
A Strategic Push Toward Regional Equality
The British government launched NPIF II with a clear objective: to stimulate economic growth beyond London and the South East by injecting much-needed capital into small and medium-sized enterprises (SMEs) located in the North of England. With funding sourced from the British Business Bank, the fund prioritized regions such as Yorkshire, the Northwest, and the North East, where startup ecosystems often face capital scarcity despite a wealth of innovation.
Many entrepreneurs in these regions struggle to attract investment. Venture capital firms traditionally concentrate their attention on tech clusters around London, leaving a wide funding gap elsewhere. The Northern Powerhouse II fund directly addressed this issue by supporting local venture capital funds, debt providers, and early-stage investors with the mandate to back promising startups operating within the designated areas.
Breakdown of Funding and Coverage
In its first 12 months, NPIF II reached over 200 companies, offering a combination of equity investments and loan facilities. These investments ranged from £25,000 seed rounds to multi-million-pound scale-up funding, depending on the growth stage and business model of each startup. The fund operated across various sectors including:
- Healthcare technology
- Sustainable energy
- AI and automation
- Fintech
- E-commerce
- Advanced manufacturing
This sectoral diversity ensured that the fund did not just fuel traditional business models, but actively encouraged innovation-driven enterprises that can contribute to long-term regional growth.
Yorkshire and Humber Leading the Way
Among all regions, Yorkshire and the Humber received the largest share of funding. More than 60 startups in the region secured investments for product development, hiring, and market expansion. Leeds, Sheffield, and Hull witnessed a rapid emergence of tech-based startups, many of which focused on AI-driven healthcare and sustainable solutions.
One such company, EcoMorph, based in Sheffield, received £1.2 million to commercialize its eco-friendly packaging solutions made from biodegradable polymers. The company plans to open a new manufacturing facility and create at least 40 new jobs in South Yorkshire by the end of 2025.
Manchester: A Magnet for Fintech Innovation
In the Northwest, Manchester saw a surge in fintech startups, many of which attracted both public and private investment. NPIF II helped LoopFi, a blockchain-based peer-to-peer lending startup, raise £2.5 million in a co-investment round with a regional VC fund. LoopFi now plans to onboard over 50,000 users and hire 25 new engineers within the next year.
Similarly, Agritech AI, based in Lancashire, secured a £500,000 loan to expand its AI-based crop prediction tools into international markets. These innovations reflect the broader push toward building regional centers of excellence in emerging technologies.
North East: Closing the Infrastructure Gap
The North East, often considered one of the most underfunded regions in England, received critical support through NPIF II. Over 30 businesses received early-stage funding, helping them navigate cash flow constraints and expand into new markets.
Durham BioSolutions, a biotechnology startup focused on anti-microbial coatings for medical devices, secured £750,000 in early-stage funding. The company now collaborates with local universities and NHS trusts to pilot its technology in clinical environments.
Building Local Ecosystems
The impact of NPIF II extends beyond individual startups. The fund catalyzed the development of local entrepreneurial ecosystems by encouraging co-investment from local angel networks, accelerators, and regional VC firms. Public-private partnerships began to flourish, and university incubators across the North reported a surge in startup activity.
Local councils, in collaboration with the British Business Bank, hosted over 100 startup events, workshops, and funding bootcamps throughout 2024-25 to connect aspiring founders with investors and mentors.
Tracking the Results
According to the British Business Bank’s Q1 2025 report, the fund generated over 1,200 new jobs within the startups it supported. Startups funded by NPIF II reported a 70% increase in revenue on average, while nearly 30% entered new export markets, particularly in Europe and Southeast Asia.
This growth paints a promising picture for the North’s future as a hub of innovation. NPIF II’s strategic focus on both scalability and job creation reinforces its status as a cornerstone of the UK’s post-Brexit regional economic strategy.
Challenges and Criticism
Despite the success stories, the fund faces some criticism. Some stakeholders argue that the application process remains too bureaucratic, with many small businesses struggling to navigate eligibility and compliance requirements. Others point out that women-led and minority-led startups continue to receive less than 20% of total funding.
To address this gap, the British Business Bank announced an additional £15 million allocation in 2025 to promote inclusive entrepreneurship, targeting founders from underrepresented backgrounds with dedicated outreach programs and mentorship initiatives.
Next Phase: NPIF II Expansion
Encouraged by the early success, the government announced plans to expand the fund’s total corpus from £660 million to £1 billion by 2026. This expansion will allow the fund to support later-stage growth rounds, helping startups transition from promising ideas to globally competitive companies.
The next phase also aims to increase international collaboration by inviting cross-border co-investments, particularly from European innovation funds and US-based tech investors. This move could open new opportunities for northern startups to scale rapidly and access global markets.
A Template for Regional Growth
NPIF II now serves as a model for future regional development policies. With over 200 startups already benefiting and dozens more in the pipeline, the fund has proven that capital infusion, ecosystem support, and government backing can transform economically underserved areas into thriving innovation hubs.
If executed consistently, this strategy can close the regional inequality gap and ensure that the UK remains a leader in global innovation, not just from London, but from every corner of the nation.
Conclusion
The Northern Powerhouse II fund has done more than inject money into northern startups—it has reignited confidence, unlocked innovation, and planted the seeds for long-term economic resilience. With momentum building and expansion on the horizon, the North stands at the forefront of the UK’s entrepreneurial future.