According to new research by Better Society Capital, the UK’s social impact investment market has just crossed the £11bn mark for the first time, which is a 12% year-on-year increase. The social and affordable housing sector regained its momentum and was the main driver of the growth. The latest market sizing report by the UK’s social investment wholesaler reveals that despite inconsistencies in certain segments, the overall expansion is still quite stable and is backed by the long-term demand for mission-driven capital.
As per the report, a record-breaking £2.1bn worth of social investments were made in 1,139 individual deals throughout 2024. This has led to a total value of outstanding investments of £11.2bn at year-end which is an increase from £10bn in 2023. Better Society Capital CEO Stephen Muers told Pioneers Post that the numbers seen were a reflection of both the sector’s resilience and its ongoing need. “Growth is still visible to us, and we consider this to be sustainable growth as the needs are still present, and there are still more organizations that can develop, take in more investment, and have a positive impact,” he stated. “It will not always be a straight line – it is always volatile and fluctuating.”
The major factor behind the rise was a large increase in the amount of money that was committed to social and affordable housing, which is now the main area of social impact investment in the UK, accounting for 54% of the total. The level of investment in the category increased year-on-year by 18% to reach £6bn at the end of 2024 after it remained flat in 2023. The volume of investment in 2024 amounted to £1.09bn, which was 27% higher than the year before. Muers explained that housing investments are often “inherently lumpy” as a result of the scale of the transactions which means yearly fluctuations are to be expected. The category has been expanding at an average yearly rate of roughly 16% since 2021.
On the other hand, the rise of the housing sector was accompanied by mixed outcomes in the rest of the social investment market. Loans granted to social enterprises and charities increased slightly by 6% to £4.4bn, in comparison to a 16% growth in 2023. Non-bank lending which is used for the working capital and growth financing was only 3% more than it was last year. Muers said that concerns about slow activities in this sector have been removed by the government’s decision to allocate £87.5m of dormant assets to blended finance wholesaler Access. If there were no such support, he said, “That part of the market would have been in a serious jam.”
On the other hand, the investment in impact ventures, i.e. startups that aim to deliver measurable social or environmental outcomes, declined by 1% in 2024 which reflects the global venture capital contraction. The segment represents about 7% of the social investment market with 121 million pounds worth of deals recorded, which is at the same level as 2023. Muers attributes the decrease to a general adjustment after the unusually high valuations at the beginning of the decade. The report quotes the research done by Dealroom which shows that the investment in impact startups worldwide dropped by 20% in 2024 and is expected to drop by another 24% this year. “Impact investment is part of that bigger picture and is not immune from it,” he said.
The portion of the market that is the smallest- social outcomes contracts- experienced a decline in the outstanding investment to £13.5m which is less than 1% of the total. Nevertheless, the field’s optimism is increasing due to the launch of the £500m Better Futures Fund that is created to support the outcome-based projects for vulnerable children. Muers described the move as “totally game-changing” but he also cautioned that the results would take a long time to get because of the long-term nature of outcomes contracts. “You will not see this in 2025 figures,” he said. “You will see almost nothing in 2026 figures.”
In his introduction to the study, Muers was positive about the broader policy changes such as the new Office for the Impact Economy that is located in the Cabinet Office. He said that the office offers a very important point of contact between the government and investments that are made for a good purpose. “These changes signal a crucial step towards aligning social investment with the country’s priorities – be it job creation and enterprise growth, public service reform, or housing,” he penned.
Data from Better Society Capital comes from 100 different funds and investment programs that are spread all over the UK. Muers expressed that the report would be instrumental in the setting of the organization’s next strategic plan for 2026-2030. “It’s great that we have breached the £10bn mark and are continuing to grow,” he stated. “But the big question now is, where should that growth be for us to be able to have the greatest impact on the issues that matter the most?”