The UK has overtaken India as the world’s third largest venture capital market amid an industry slump in which investment and deal numbers dropped markedly last year.

The British Business Bank, the state economic development agency, said there were reasons to be optimistic about the UK’s ability to attract and finance fast-growing companies despite the slowdown.

Venture investment declined by 48 per cent to £8.8 billion in 2023 in the UK compared with the previous year, while the number of deals fell by 25 per cent to 2,152.

The global venture capital industry has been hit by higher interest rates, which reduces its attractiveness to investors, pressure on valuations and a shortage of “exit” or sale opportunities, preventing fund managers from reinvesting.

However, Louis Taylor,