Neonatal encephalopathy (NE) represents a primary cause of neonatal death and neurodevelopmental impairments. In newborns with NE, cerebral hyperperfusion is related to an increased risk of severe adverse outcomes, but less is known about the link between perfusion and mild to moderate developmental impairments or developmental delay. Using arterial spin labelling perfusion MRI, we investigated the link between perfusion in 36 newborns with NE and developmental outcome at 2 years. 53% of the infants demonstrated a normal outcome at 24 months, while two had cerebral palsy with impairments in cognitive, motor, and language domains, and three infants died. The remaining infants showed mild or moderate delays in development in one or two domains. Hyperperfusion across the whole brain was associated with more adverse outcome, including an increased risk of death or severe disability such as cerebral palsy. Among the surviving infants, higher perfusion in the bilateral basal ganglia, thalamus, hippocampus and cerebellum during the neonatal period was related to a poorer cognitive outcome at 2 years. Hyperperfusion in infants with NE was associated with a more adverse outcome and lower cognitive outcome scores. In addition to severe adverse outcomes, altered perfusion is also related to mild to moderate impairment following HIE. Neonates with neonatal encephalopathy (NE) show increased cerebral perfusion globally, which is linked to a more adverse outcome. Higher perfusion in the bilateral basal ganglia, thalamus, hippocampus and cerebellum during the neonatal period was related to a poorer cognitive outcome at 2 years. In addition to severe adverse outcomes altered perfusion is related to mild to moderate impairment following NE. To improve neurodevelopmental outcomes, it is important to improve our understanding of the factors influencing cerebral perfusion in infants with NE.