In this week's briefing, we dive into the latest developments that are shaping the UK's economic landscape – from a promising drop in inflation rates to the evolving venture capital market.
Additionally, we’ll discuss the resurgence of optimism in the UK property market which has driven increased buyer activity, as well as insights from further afield with highlights from April’s World Economic Outlook
UK Economy
New UK Inflation Data
- UK consumer price inflation fell to 3.2% in March – its lowest rate since September 2021 – inching closer to the Bank of England's (BoE) target of 2%.
- The slowdown in inflation was attributed partly to a decrease in food prices, with growth in this category slowing to 4.0% from 5.0% in February.
- March saw a 0.6% increase in consumer prices compared to February, rising at a similar pace to that of the previous month.
- The annual core rate of inflation, excluding energy, food, alcohol, and tobacco, eased to 4.2% in March from 4.5% in February.
- Expert analysis suggests that despite the decline in headline inflation, concerns remain about persistent inflationary pressures, particularly in wages and services, which may influence the pace and magnitude of future rate cuts by the BoE.
- The possibility of rate cuts faces considerations such as global economic conditions, potential impact on currency value, and the balancing act between stimulating growth, controlling inflation and avoiding a wage increase spiral.
UK Venture Capital
Insights on the current state of UK VC
- UK start-ups raised over $3.9 billion in Q1 2024, with the fintech sector leading the way.
- Notably, the entirely online bank Monzo led fintech investments, confirming the clear prominence of digital platforms in today's market.
- New data from HSBC Innovation Banking reveals that the UK has retained its place as 3rd for start-up investments globally, behind only the US and China and surpassing India.
- More than half of the venture capital investment into UK companies came from overseas, indicating the continued attractiveness of UK start-ups to international investors.
- Despite the overall decrease in investment, this trend aligns with pre-pandemic patterns, making it clear that UK VC is still heading in the right direction.
UK Property
Why Optimism Has Returned Into The UK Property Sector
- Optimism returns to the UK property market, fueled by cheaper mortgage rates and a more stable economy.
- Buyers are favoured in the current market, with increased activity and sales, and prices rebounding faster than anticipated since the start of 2024.
- New data from Nationwide shows a reversal in house price declines, with prices increasing by 1.4% in the first quarter of 2024, signalling a potential upswing.
Source: nationwidehousepriceindex
- Analysts project stability and marginal growth in house prices by the end of the year, with some forecasting a 5% rise for the UK property market.
- Research conducted by the real estate agency Hamptons suggests that London's property market, which has seen subdued growth since 2016, is poised for a revival, with homes increasingly selling above their asking prices.
Global Economy
Global Insights From The International Monetary Fund's (IMF) Latest World Economic Outlook
- Insights from the IMF’s April 2024 World Economic Outlook have revealed resilient global economic growth alongside a notable slowdown in inflation.
- The report – which presents IMF staff economists’ analyses of global economic developments – projects 3.2% growth for the current and next year, with median headline inflation declining from 2.8% to 2.4% by the end of 2025.
- According to the report, the US economy is exhibiting robust performance, characterised by strong productivity and employment growth, prompting cautious monetary easing by the Federal Reserve.
- Growth throughout the Eurozone is also set to rebound, but from already low levels as tight monetary policies weigh heavily on activity.
- Many large emerging market economies are said to be performing well, benefiting from rising tensions between China and the US. As a result, these nations are rapidly increasing their influence on the global economy.
- One area of discussion for the IMF has been the rapid introduction of AI whereby their hope of AI boosting productivity has been met with the possibility of a negative labour market disruption.
- In the report, the IMF states,” Realising the potential of AI without the negative impacts will require nations to improve digital infrastructure, invest in human capital and form global rules on usage”.
Final Note
This week's briefing offers valuable insights into various areas of the UK economy. With property and venture capital sectors showing consistent growth, coupled with a steady decline in inflation, the stage is set for sustainable economic expansion in the UK.
Additionally, the ongoing IMF meeting has provided a comprehensive overview of the global economic landscape and its potential trajectory, highlighting significant trends and developments shaping economies worldwide.
At GCV, we remain committed to providing the latest insights into the investment and wider economic landscape in order to support investors in making well-informed decisions when choosing where to allocate their capital.
If you would like to find out more about a number of tax-efficient investment strategies available to UK investors, discover our range of downloadable resources here.