Venture capital investment in European tech startups is projected to decline for the third consecutive year, with expectations of $45 billion in funding by the end of 2024. Despite this, the sector shows signs of stabilization, with improved valuations and falling interest rates. Key reforms, particularly in pension fund investments, could unlock billions for European scale-ups, potentially leading to the continent"s first trillion-dollar tech company by 2034.
Doubts are rising over the Labour government"s growth agenda, with analysts warning of potential tax increases next year if economic reforms fail to stimulate growth. Despite recent measures aimed at boosting investment, the U.K. economy showed minimal growth, prompting concerns about the sustainability of public services funding. The Chancellor faces a challenging balance between maintaining tax revenues and encouraging business investment, with future tax changes likely contingent on economic performance against forecasts.
Britain"s government is pushing for the consolidation of local government pension schemes into larger "megafunds," as announced by Chancellor Rachel Reeves in a recent speech. This initiative continues a trend that began in 2015 under former Chancellor George Osborne, who aimed to merge these schemes into "British wealth funds."
UK Prime Minister Keir Starmer met with Chinese President Xi Jinping at the G20 summit, advocating for "consistent, durable" relations focused on trade, economy, and climate. This marks the first leader-level meeting since 2018, aiming to revitalize UK-China ties after years of tension. Starmer emphasized the importance of predictable relations and plans for further economic dialogue, while Xi acknowledged the potential for cooperation between the two nations.
Finance Minister Rachel Reeves announced plans to overhaul regulations affecting Britain's vital financial sector, which she claims have hindered the City's growth since the global financial crisis. This initiative aims to stimulate British economic development and unlock the industry's potential.
The U.K. economy grew by just 0.1% in the third quarter, falling short of the 0.2% forecast, following a stronger 0.5% expansion in the previous quarter. The services sector also saw minimal growth, while inflation dropped to 1.7%, prompting a rate cut by the Bank of England. Finance Minister Rachel Reeves expressed dissatisfaction with the growth figures, emphasizing the need for investment and reform to stimulate the economy.
European markets are poised to open lower as investors digest U.S. Federal Reserve Chair Jerome Powell's hawkish remarks and await new U.K. GDP data, which showed a 0.1% growth in Q3, below expectations. The U.K. inflation rate fell to 1.7%, enabling a recent interest rate cut by the Bank of England. Meanwhile, Labour's Finance Minister announced reforms aimed at stimulating growth, with warnings of potential tax increases if progress is not made.
A recent adjustment in the management of the Bank of England's bond portfolio has potentially freed up to £10 billion for UK Chancellor Rachel Reeves, aiding in the control of borrowing. Reeves has agreed with BOE Governor Andrew Bailey to slightly reduce the cash buffer meant to protect against unexpected losses, allowing the Treasury to transfer less money to the central bank as the reserve diminishes.
Chancellor Rachel Reeves emphasized the U.K.'s commitment to free and open trade, particularly with the U.S., during her first Mansion House event. She expressed eagerness to collaborate with President-elect Trump amid concerns over potential tariffs that could impact the U.K. economy. Reeves also highlighted the need to reset the U.K.'s relationship with the EU post-Brexit, addressing geopolitical uncertainties and structural challenges.
Bank of England Governor Andrew Bailey has urged Chancellor Rachel Reeves to avoid raising tariffs in response to anticipated US-led protectionism, warning that such actions could trigger a global trade war. In a speech at London’s Mansion House, he emphasized the importance of maintaining openness in trade despite economic security concerns.
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