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Investors are, understandably, keen to gain a clearer view of what the market landscape could look like in 2024. With this goal, we examine some key trends and data points, highlighting early-stage investments in particular and drawing from a range of established sources.
We hope these insights are helpful to you. To learn more about our EIS projects and other early-stage opportunities, visit our portfolio page here. For enquiries regarding our latest projects and funding, you can reach us via:
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A divided picture of growth
Many advanced economies are expected to see a slowdown in economic growth in 2024. Indeed, the third quarter of 2023 witnessed no GDP growth in the UK – a trend which the Bank of England (BoE) expects to continue in 2025.
By contrast, many emerging economies such as China, the Philippines, the Czech Republic and Malaysia are expected to offset this contraction – contributing to an overall global growth projection of 2.7 – 3%.
UK – the inflation nation?
Regarding inflation, the UK’s 9.2% rate in November 2023 compared unfavourably to many other Western nations. France had a 7.9& rate at the same time, with Italy and Germany showing a 6.1% rate. Yet the picture does seem to be changing.
UK inflation fell dramatically to 4.2% in late 2023. The BoE expects that the CPI (Consumer Price Index) is likely to hover above 3% this coming year, hopefully falling back down to its 2% target in 2025. Some analysts believe that the target could even be achieved in 2024.
Falling inflation would be good news for many UK businesses which could see falling input costs for their products. Lower inflation also tends to accompany higher consumer spending – potentially boosting sales.
What about interest rates?
Since late 2021 the BoE has raised UK interest rates 14 times to try and curb the nation’s surging inflation problem. Currently, the base rate stands at 5.25%; the highest since the 2008-2009 Financial Crisis. This has made it harder for many homeowners to afford monthly mortgage payments and business owners to secure finance from banks.
However, if inflation does fall in 2024, it will be harder for central banks to maintain higher interest rates. If rates come down, early-stage businesses could re-finance some of their debt, making it more affordable. Consumers on variable-rate mortgages could see their monthly payments come down, allowing for more income to be spent on company products.
An unwelcome tax landscape
The UK has faced an increasingly challenging tax regime in recent years. Our households now face the highest tax burden since the Second World War, despite the National Insurance cut announced in November 2023.
Unfortunately, there is little sign of this situation changing anytime soon. Prime Minister Sunak has hinted at further tax cuts in 2024 (undoubtedly to “soften up” the electorate before the coming general election). Yet no details have yet emerged about what these might look like.
The prospect of a Labour Party victory, moreover, is unlikely to result in significant cuts to corporation tax or expansions of business/investor reliefs. Indeed, the total tax-to-GDP ratio of 35.3% could even grow closer to other countries, such as France or The Netherlands, in the coming years. Here, prudent tax planning will be invaluable to help investors protect their hard-earned returns from needless tax erosion.
Technological innovation
More advances in artificial intelligence (AI), cloud computing, quantum computing and deep learning are expected in 2024. Developments in cyber threats could lead to a greater converging of IT and security teams. Increasing collaboration between hyperscalers and AI models could bring forward huge leaps in the data analytics landscape.
Remote working is expected to remain a popular approach in 2024, facilitating demand for zero-trust models powered by cloud computing and generative AI. post-quantum cryptography (PQC) could face increasing adoption this year. More companies could turn to AI to reduce energy consumption costs.
The vital role of startups
Many analysts expect 2024 to be a great year for venture capital (VC). The high inflation of 2023 – leading to scarcer capital and fewer allocations – is likely to ease off, making it easier for early-stage companies to generate growth and profits.
The continuation of higher interest rates (i.e. above 2%) for the foreseeable future would put downward pressure on company valuations, which is great news for value investors who are willing to conduct proper due diligence.
A significant wildcard for investors, of course, is the geopolitical landscape in 2024. Recent strikes have occurred between Pakistan and Iran, as well as attacks on commercial shipping in the Red Sea by Houthi Rebels.
These follow the terrible events in Israel and Gaza since 7 October 2023, where fighting has threatened to spill out into a wider regional conflict. These situations highlight the importance of maintaining a diversified investment portfolio to mitigate the potential impact of warfare.
Invitation
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