Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.
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Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  • You could lose all the money you invest
  • Most investments are shares in start-up businesses or bonds issued by them. Investors in these shares or bonds often lose 100% of the money they invested, as most start-up businesses fail.
  • Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the platform you are investing through. You should do your own research before investing.

You won't get your money back quickly

  • Even if the business you invest in is successful, it will likely take several years to get your money back.
  • The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
  • Start-up businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
  • Some platforms may give you the opportunity to sell your investment early through a 'secondary market' or 'bulletin board', but there is no guarantee you will find a buyer at the price you are willing to sell.

Don't put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Learn more here.

The value of your investment can be reduced

  • If your investment is shares, the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
  • These new shares could have additional rights that your shares don't have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

You are unlikely to be protected if something goes wrong

  • Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker.
  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA's website here.

For further information about investment-based crowdfunding, visit the crowdfunding section of the FCA's website here.
Weekly Briefing: October Budget Insights, Optimism Across UK Venture Capital, UK Shop Prices Fall 0.3% & House Prices Align With Summer Trends
Weekly Briefing
Matthew Robineau
· 4 min read
· Updated on

Weekly Briefing:  October Budget Insights, Optimism Across UK Venture Capital, UK Shop Prices Fall 0.3% & House Prices Align With Summer Trends

In this week's briefing, we will focus on the Labour government's upcoming budget, which could bring significant tax changes, the first drop in shop prices in two years, a cause for optimism in the UK’s venture capital market, and the resilience of the UK housing market amid economic challenges.

UK Economy

Labour Government Faces Tough Budget Decisions, Making Tax Increase Inevitable

  • Sir Keir Starmer has warned that October's Budget will be "painful" and will demand significant sacrifices from the public, emphasising that people must endure "short-term pain for long-term good." He stressed that those with the "broadest shoulders" will bear a heavier financial burden as the government addresses inherited economic challenges.

  • In his criticism of the previous Conservative administration, Starmer highlighted the creation of a £22 billion "black hole" in public finances, accusing the former government of perpetuating economic and societal failures through ineffective and populist policies.

  • Although the Labour government has pledged not to increase National Insurance, income tax, or VAT, Chancellor Rachel Reeves has indicated that other tax adjustments are possible. This includes potential increases in inheritance tax and capital gains tax (CGT), as well as possible reforms to pension tax relief, reflecting a complex approach to fiscal policy.

  • To manage budget constraints, the Labour government has already announced cost-cutting measures such as removing the planned cap on social care payments and withdrawing winter fuel allowances from 10 million pensioners. These decisions aim to address fiscal issues but have raised concerns among some Labour backbenchers and the public.

  • Addressing the need for fiscal adjustments, Starmer stated, "To repair the economic damage and secure a stable future, we must make difficult choices now. This includes adjusting our tax policies to ensure fairness and sustainability in the long run."

  • Given the potential for increased inheritance and capital gains tax rates and rules, it is clear that investors should proactively explore tax-efficient strategies to optimise their financial planning and mitigate the impact of these almost inevitable tax changes.

    FTSE 100 Shop Prices Fall for the First Time

  • In August 2024, mainstream shop prices experienced their first decline in over two years, marking a pivotal shift in the UK retail landscape. This drop, reported by the British Retail Consortium (BRC), signals heightened competition among retailers who are responding to the financial pressures on consumers by reducing prices across various sectors.

  • The British Retail Consortium (BRC) attributes this price reduction to a combination of competitive strategies and easing supply chain constraints, particularly in essential goods. This has provided much-needed relief to consumers, who have faced persistently high inflation over the past year.

  • According to the BRC, this price decrease is a double-edged sword. While it may bolster consumer confidence and spending in the short term, it could also squeeze profit margins for retailers, particularly small and medium enterprises that may lack the financial cushion of larger corporations.

  • Analysts are cautiously optimistic, suggesting that this development could herald a period of greater consumer spending, potentially driving economic growth in the latter half of 2024. However, they warn that if prices continue to fall, it may lead to a deflationary environment that could harm the broader economy.

  • The BRC spokesperson emphasised, "This price drop is a welcome development for consumers, but the long-term impact on retailers’ bottom lines remains to be seen,".

    UK Venture Capital Market

    Cause for Optimism in the UK’s Venture Capital Market

  • The UK’s venture capital market is showing robust signs of recovery, with a notable uptick in investment activity across key sectors such as technology, healthcare, and renewable energy, according to GlobalData.

  • "The decrease in VC deal volume has not affected the overall funding value, indicating that while VC firms are exercising caution, they are still willing to make significant investments in promising startups," said Aurojyoti Bose, lead analyst at GlobalData.

  • GlobalData also points out that government initiatives aimed at fostering a supportive ecosystem for start-up's, including tax incentives and grants, have played a crucial role in this resurgence.

  • This positive momentum in the venture capital market is expected to continue, with experts forecasting sustained growth as more investors seek opportunities in high-growth sectors. This trend is likely to contribute significantly to the UK’s economic recovery, particularly in regions outside London, where tech hubs are rapidly expanding.

  • GlobalData’s analysts observed, "the UK venture capital market is poised for a strong recovery, with increasing investor interest in sectors that promise high returns and societal impact," underscoring the optimism surrounding the future of UK startups.

    UK Property Market

    UK House Prices drop in line with long-proven summer trends

  • Historically, August has consistently seen a decline in house prices from July over the past 18 years, and this month’s dip aligns with the long-term average.

  • This annual decrease is typically due to a slowdown in market activity during the summer holidays, which often results in more competitive pricing by sellers.

  • However, this year, there is a notable shift in the market dynamics. The Bank of England’s first rate cut in four years, reducing the rate to 5% from a 16-year high of 5.25%, has generated a significant surge in buyer interest, with the number of potential buyers contacting estate agents jumping by 19% compared to the previous year, marking an increase from the 11% rise observed in July.

  • In response to this uptick in buyer activity, Rightmove has adjusted its 2024 forecast, now predicting a 1% increase in average asking prices, reversing the earlier expectation of a 1% decline. This revision reflects the positive impact of the rate cut on market sentiment.

  • The market’s renewed momentum is also evident in the increase in sales agreements, which are 16% higher than during the peak mortgage rate period a year ago. Additionally, the number of new sellers entering the market has risen by 5% year-on-year.

  • “As the summer holiday season comes to an end, the conditions are there for a more active autumn market,” Bannister said.

Final Note

This week offered a nuanced look at the UK’s landscape, blending cautious optimism with notable challenges on the horizon. 

The first drop in shop prices in two years provided a welcome boost to consumer spending, signalling a welcome shift in retail dynamics. 

Meanwhile, the UK’s venture capital market demonstrated renewed vigour, compared to previous years, particularly in high-growth sectors like technology and renewable energy. Alongside this, the housing market has followed its usual trend but, based on key data, is expected to see some strong growth over the coming months.

However, with the Labour government's “painful” budget on the horizon, likely bringing significant tax hikes, it’s crucial for both seasoned and new investors to consider tax-efficient strategies. Leveraging schemes like EIS and SEIS could offer substantial tax benefits when navigating these fiscal challenges in the months and years to come.
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