London businesses will face a sharp drop in investment in the coming months, a top British investment bank official warned.
Matt Ade, senior economist at the state-backed Economic Development Bank, said volatile markets in the UK mean investment in growing London companies will slow in the coming period, but predicted capital will eventually return.
“I expect to see significantly fewer deals and it looks like there will be significantly fewer deals in the third quarter,” said Ade. city am in an interview.
“But it’s not that I don’t see it as a long-term problem. It’s just part of the volatility of these markets.
“London is fundamentally a strong market with many innovative companies looking for funding, and many people willing to fund them.”
Financing for businesses is starting to slow this year after an investment frenzy in 2021, when a record amount of capital was injected into London businesses.
The latest data from the state-backed British Business Bank showed that London companies closed nearly half of the country’s total equity deals last year.
However, analysts are warning of a global slowdown in funding in the coming months as rising interest rates make it harder for investors to get cash and so-called ‘dry powder’ has receded this year before the recession.
“The shift in monetary policy from historically low interest rates, which fueled growth, spending and lending, is remarkable and its impact on the VC bargaining environment will be evident,” PitchBook analysts said in a recent report.
“VC deal activity has grown significantly year over year (YoY) over the past decade, and we believe there will be a flat rather than a sharp decline in 2023.”