The British Business Bank says that investment in London will rebound strongly after the decline

A senior official at the British Business Bank has warned that London companies will have to contend with a sharp drop in investment in the coming months before they can rebound in full force.

Matt Addy, chief economist at the state-backed Economic Development Bank, said volatile markets in the UK meant that investment in growing companies in London would slow in the coming period, but he expected capital to eventually return strongly.

“I expect to see a lot less deals and there are a lot fewer deals in the third quarter in terms of appearance,” Uday said.

“But that doesn’t sound like a long-term problem to me. It’s just part of the volatility of these markets.

“Fundamentally, London is a strong market with a lot of innovative companies looking for funding, and a lot of people looking to fund them.”

The comments come as funding has begun to slow for companies this year after a wave of investment in 2021 saw record amounts of capital injected into the London business.

New figures from the state-backed British Business Bank showed that London firms accounted for nearly half of all equity deals in the country last year.

Analysts warn of a slowdown in financing globally in the coming months, however, as higher interest rates make it more difficult for investors to access liquidity, and the so-called “dry powder” amassed before this year’s downturn dwindles.

“The shift in monetary policy from historically low interest rates that boosted growth, spending and borrowing is notable, and its impact on the venture capital deal-making environment will be even more pronounced as we move into the fourth quarter of 2022,” Pitchbook analysts said in a recent report.

“The growth of venture capital deal activity has been significant year-on-year over the past decade, and we believe a flattening could happen in 2023, rather than a sharp decline.”

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