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Optimism levels tumble among private equity partners

But 57 per cent still expect improvement in the UK economy over the next 12 months, according to a n

With the UK back in recession and the eurozone seemingly no closer to finding a real solution to its crisis, a fall in market sentiment was perhaps inevitable. According to a new survey conducted by Investec Fund Finance, 57 per cent of general partners (GPs) at UK-based private equity firms still expect the economic environment in the country to improve over the next 12 months. This is a marked drop from 81 per cent last year.

The survey, conducted by Investec during February-March this year, also revealed that under a third (31 per cent) believed that their firms’ next fund will be larger than the current one, compared with nearly half (43 per cent) in 2011. Of these, 70 per cent say their next fund will be no more than 20 per cent larger; last year, 85 per cent said their fund would be at least 20 per cent bigger.

Some 77 per cent rate the current environment for raising a new fund as "very poor" or "quite poor".

It's not all doom and gloom, however. Just 10 per cent believe their next fund will be smaller, with 54 per cent predicting it will be about the same size. 

Simon Hamilton of Investec Fund Finance, said:

While the majority of GPs remain optimistic about the UK economy’s growth prospects, the findings paint a very different picture from last year’s bullishness. Concerns around fund raising have become more acute and as conditions show little sign of improvement it’s likely that more firms will end up with funds that are either the same size or smaller than the current one.

However, despite battling against tough economic headwinds the private equity industry continues to demonstrate resilience and tenacity; levels of optimism are significantly higher now than in 2009, when 11 per cent of GPs predicted they would not raise another fund. This year the figure has more than halved to 5 per cent.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.