Areas of investment

Outstanding investment in social and affordable housing has increased by 21% this year to £7.3 billion (£6.0 billion in 2024). Deal flow has increased from £1.09 billion in 2024 to £1.24 billion in 2025, an increase of 13%, following a 27% rise in 2024 (from £861 million in 2023).

Social and affordable housing has grown for a fifth consecutive year and remains the largest part of the UK social impact investment market.

However, the composition of that growth has changed. Previously, material growth had come from listed vehicles, but as the market has matured, growth is now being driven by large, open-ended private institutional funds.

The growth is driven by pension and insurance capital. As LGPS funds pool and look for long-dated, inflation-linked income alongside demonstrable local impact, affordable housing has become increasingly recognised as an asset class that can offer both at scale.

The open-ended funds that launched in 2024 are now deploying at pace and together account for over a quarter of all housing deal flow in the year. This suggests that recently raised capital is quickly being converted into homes rather than waiting to be drawn down.

The number of organisations supported by housing funds was broadly flat, increasing from 276 to 279, much slower than the growth in capital. This is consistent with a market creating strategic partnerships with registered providers and housing partners.

Outstanding investment in social lending has increased by 8% since 2024 to £4.7 billion (£4.4 billion in 2024). Deal flow was similar at £917 million (£924 million in 2024).

Bank lending

Bank lending refers to loans made to charities and social enterprises by dedicated social banks. This area has grown by 5% from £2.9 billion to £3.1 billion.

1. Most of that growth came from a substantial increase in new lending at one of the largest social banks.

Across the rest of the segment the picture is steadier, with several banks lending less in 2025 than in 2024 even as their outstanding books held broadly flat. Bank lending remains highly concentrated: between them, the two largest social banks hold around 70% of all outstanding bank lending to the sector.

The number of charities and social enterprises borrowing from social banks was essentially unchanged at around 1,990, following last year's methodology-driven fall in how one lender counts borrowers. The increase in lending value reflects larger loans to a stable base of borrowers rather than a widening of access.

Non-bank lending

Non-bank lending refers to debt finance taken on by charities and social enterprises to provide working capital and growth finance. These products are typically smaller and shorter term than bank loans and often involve a range of blended finance tools. This asset class also includes investments made into community shares and crowdfunding platforms. This area has grown by 31% from £699 million to £913 million, with deal flow up 45% to £287 million.

This is the strongest growth rate anywhere in social lending, and it comes from three sources.

1. A national development bank is included in the market sizing for the first time this year, contributing around £150 million of outstanding investment. Excluding this, underlying growth in non-bank lending was closer to 9%.
2. CDFI lending grew again, continuing an unbroken run of year-on-year growth and underlining the value of dedicated programmes and blended finance tools.
3. Affordable credit programmes also expanded materially.

These gains were partly offset by contraction among smaller foundation and intermediary lenders.

Charity bonds

Charity bonds refer to tradable loans that allow larger charities to raise large-scale unsecured finance with fewer restrictions than bank finance. This area is broadly flat, down 1% from £751 million to £746 million, with only £4 million of reported deal flow.

Outstanding investment in impact venture has increased by 40% to £1.14 billion (£815 million in 2024), passing £1 billion for the first time. Deal flow, however, has fallen by a third (34%) to £80 million (£121 million in 2024).

The increase in valuation has been driven by strong performance in a small number of underlying companies, as portfolios mature in earlier vintages and value drivers increase disproportionately. To some extent, this can be seen to indicate a maturing market, as outlier performance begins to materialise.

At £80 million, new investment is a third below last year. However, the number of deals made in 2025 was higher than that in 2024, and the overall number of companies backed continues to rise. This points to a larger share of investment coming from early-stage funds this year, and fewer large growth rounds than in 2024.

Within the UK, investment continues to focus on health and financial inclusion, consistent with previous years.

We view our figure as a conservative estimate of overall market activity. It can be challenging to collect data from large institutional venture managers, for reasons of client confidentiality or otherwise. This means genuine UK impact venture activity is likely to be somewhat larger than the figure we publish.

Outstanding investment in social outcomes partnerships was at £6 million by the end of 2025 (£13 million in 2024). However, deal flow rose substantially to £9.7m, after a very quiet period in 2024, due to Bridges’ renewed investment activity. These numbers are consistent with a market in transition between the last central outcomes fund (the Life Chances Fund) coming to an end and the launch of the new Better Futures Fund.

Over £80 million has been invested in social outcomes partnerships to date and most has been fully repaid, having delivered both financial returns and social outcomes. The fall in outstanding investment from a high of £73 million in 2021 largely reflects this: as contracts from the Life Chances Fund completed, capital was returned to investors, ready to be recycled into the next wave of projects. With fewer new contracts launched in the interim, we expect 2025 to mark the low point of this cycle.

The forward-looking picture is significantly more positive. The government's £500 million Better Futures Fund, announced in July 2025, represents the largest single commitment to outcomes-based funding in the UK and globally to date. With outcome payers expected to match central funding, it could unlock up to £1 billion in outcomes tackling child poverty. The fund is now live, with Round 1 projects announced in September 2026, and is expected to bring new entrants and a higher volume of deals to the market in the coming years.

In 2025, BSC committed up to £20 million to Bridges Outcomes Partnerships' Better Outcomes Fund V, the largest commitment to date to a social outcomes fund manager. This is not yet reflected in the year-end data, as the fund was still raising. With a target size of £100 million, BOF V is expected to be the largest social outcomes fund to date. Together with the Better Futures Fund, this points to a growing pipeline of activity in the years ahead.