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Funding for UK-based health tech companies dropped by 37% in 2022, according to new research from market intelligence platform Tracxn.

Funding for the UK health tech sector dropped from $2.11bn in 2021 down to $1.32bn in 2022 in a year when rising interest rates and soaring inflation caused a drawback in overall tech investment levels.

The report, released to coincide with World Health Day, found that the decline was driven by a 58% drop in late-stage funding and a 23% in early-stage funding.

However, seed-stage funding experienced a 39% year-on-year increase, reaching $254m in 2022.

While the sector experienced a considerable drop off in funding last year, 2022 was still the second most well-funded year for British health tech in the past decade.

The majority of the funding activity came in the second half of the year, representing 61% of deals in 2022. This is in direct contrast to the UK tech sector as a whole, which saw funding levels decline towards the end of the year.

Within that half, the third quarter had the most health tech funding activity, contributing 38% of the year’s investment capital.

Notable investment rounds for UK health tech companies last year included a £25m Series B extension for Zoe Health, a nutrition and medical testing app, and a £74m Series C round for Osler Diagnostics, a University of Oxford spinout that has developed a portable diagnostic medical scanner.

Tracxn’s report noted that the UK leads the continent in the health tech industry, both in terms of funding and the number of startups.