What UK Climate Tech Needs to Scale

What we heard at Tech Nation’s Climate Policy and Innovation Forum about the policy, funding and regulatory barriers preventing UK climate companies from scaling.

One climate tech company can build a plant to recycle nylon in about three months. Getting the permit to run it takes twelve, eight of them spent with the paperwork sitting untouched on a desk. That gap between what founders can build and what the system lets them do is the real story of UK climate tech. The country has the ambition, the science and the founders. What it lacks is a system that lets them scale, from pricing and permitting to procurement and a capital stack few founders can navigate.

That gap is what set the tone for our Climate Policy and Innovation Forum, hosted in partnership with HSBC Innovation Banking and Sage, which brought policymakers and corporates together at the House of Lords for a day of keynotes, firesides and roundtables, with startups from our Climate Programme sharing directly the regulatory barriers slowing them down as they try to scale.

Britain has the foundations

Opening the day, Sir Andrew Steer, former President and CEO of the Bezos Earth Fund, set out the case for optimism grounded in realism. Britain starts from genuine strength, from world-class universities, deep science and mature finance to global networks and intellectual property it can export. The scale is real: the UK is home to more than 5,000 climate tech startups and scale-ups, second only to the United States, according to McKinsey. But the sector has moved beyond the optimism of COP26, Steer argued, and the next phase has to be practical, economics-led and focused on real-world deployment.

The trouble is that the system around these companies makes that hard, and the cost is already visible. Founders across the day described finance and customers being easier to find abroad, and some are already looking elsewhere as a result. The economics often push the same way: on the latest government and IEA figures, the UK has the highest industrial electricity prices of any major developed economy, so the energy-intensive processes at the heart of much climate tech are cheaper to run almost anywhere else. The risk is not that these companies fail, but that Britain incubates them and then watches them leave.

Money exists, the right kind does not

The money exists, but not in the form founders need. Climate tech companies need a different mix of funding at each stage of growth: equity for early speed, then debt, grants, export and blended finance to scale. Stitching those sources together is where it breaks down. Founders described expensive venture debt loaded with punitive warrants, government loans too small to matter, and restrictive rules attached to certain tax-advantaged funding.

UK climate tech raised £4.5 billion in 2024, up nearly a quarter even as global climate funding fell, according to PwC. But that figure counts no debt at all and debt is exactly the part of the stack founders say they cannot get on workable terms. The gap isn’t about individual founders falling short; it reflects a long-standing caution among UK investors, who McKinsey notes are often reluctant to lead rounds or commit the long-term capital that hard climate tech needs. Discussions across our roundtables kept returning to a hard truth: this has been a problem in climate funding for two decades, and it hasn’t improved. Much of the conversation turned to how that might finally change: better collaboration between public institutions and private investors on blended finance, philanthropic capital helping to carry early-stage companies, and the government stepping in to share some of the risk.

Where founders keep getting stuck

We asked several founders from our Climate Programme to share the barriers they face.

Epoch Biodesign, whose permitting story opened this piece, is far from alone. Other founders are caught out by rules that do not yet recognise what they are building. Xampla makes plant-based coatings designed to replace single-use plastic, yet there is still no agreed definition of “plastic free”, leaving the companies trying to cut plastic more exposed to regulation than those still using it.

For Caudal Energy, the block is a catch-22. Tidal developers are ready to put demonstrators in the water, but the current Contracts for Difference pot is far too small to cover set-up costs, and the case for planning the grid around tidal keeps stalling on the fact that there isn’t much tidal in the water yet.

ample raised a different kind of obstacle. Climate companies must satisfy several government departments and regulators at once, and what one department wants to encourage often runs up against another. With no one coordinating across them, promising ideas stall in the gaps.

What needs to change

Greg Jackson, CEO of Octopus Energy, offered a practical takeaway: assume policy will not move in your favour and build in the gaps anyway. Octopus started with the cost people actually feel, their energy bill, and used clean power, data and smarter systems to bring it down. Policy matters, but founders who wait for it tend to wait a long time. Even so, the founders were clear about what would help and the asks from the day were consistent:

• Cross-departmental “mission control” for innovation so progress in one part of government isn’t lost between departments
• A tidal Contracts for Difference round of at least £40 million alongside a grid plan that actually counts tidal in.
• A clear, shared legal definition of “plastic free” so the companies replacing plastic stop being the ones punished for it.
• A simple first move any business can make today: join alliances like the Better Business Act and shift the market from the inside.

The question is no longer whether UK climate tech works. It is whether the system will let it scale fast enough.

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