Medicine looks a healthy bet

The IT and biotech sectors particularly stood out for their turnaround story, as shares rallied and confidence returned to the sectors. A survey of mid-market venture capitalists and brokers for Grant Thornton tipped business services, healthcare, financial services and the retail and leisure sector for recovery over the coming months.

But sentiment elsewhere remains subdued indicating that 2004 could well be another year of uneven recovery.

It may be that, in some areas, the steep valuations reached in the last bull market did not correct themselves sufficiently when the downturn came. The tech and biotech bust was savage, leaving little room for even the most efficient to survive.

This could explain why brokers surveyed are still cautious about prospects in media and food despite developments that, in theory, should support the sector.

The Communications Act, which came into force last summer, removed most rules relating to cross-media ownership. It would be logical to expect this measure to help stimulate activity in the market.

Likewise, in the food sector, pricing pressure and the desire by larger retailers to control the supply chain should drive consolidation among smaller producers.

Elsewhere, the impending relaxation of the UK’s gambling laws in 2004 make betting chains and casino operators an obvious area for growth and deal activity.

But in the long-term, brokers recognise healthcare as being one of the safest bets. Thanks to an ageing population and insatiable demand for better drugs there will always be plenty of pressure on the government to spend on the nation’s health.

It was the healthcare sector that propelled the UK to command its strong lead in European venture capital funds in recent months.

Brokers are not just expecting recovery to be confined to drugs companies.

Tipped for particularly healthy investment are medical device manufacturing, care homes and private hospitals.