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Spring Budget 2024

Spring Budget 2024

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On 6 March, Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget to the House of Commons declaring it was “a Budget for long-term growth.” The fiscal update included a number of new policy measures, such as a widely-anticipated reduction in National Insurance, abolition of the non-dom tax status and new savings products designed to encourage more people to invest in UK assets. The Chancellor said his policies would help build a “high wage, high skill economy” and deliver “more investment, more jobs, better public services and lower taxes.”

 

OBR forecasts

During his speech, the Chancellor declared that the economy had “turned the corner on inflation” and “will soon turn the corner on growth” as he unveiled the latest economic projections produced by the Office for Budget Responsibility (OBR). He started by saying that they showed the rate of inflation falling below the Bank of England’s 2% target level in “a few months’ time.” He noted that this was nearly a year earlier than the OBR had forecast in the autumn and said this had not happened “by accident” but was due to “sound money” policies.

 

The Chancellor also noted that the OBR forecast shows the government is on track to meet both its self-imposed fiscal rules which state that underlying debt must be falling as a percentage of gross domestic product (GDP) by the fifth year of the forecast and that public sector borrowing must be below 3% of GDP over the same time period. Indeed, in relation to the second rule, Mr Hunt pointed out that borrowing looks set to fall below 3% of GDP by 2025/26 and that by the end of the forecast period it represents the lowest level of annual borrowing since 2001.

In terms of growth, Mr Hunt revealed that the updated OBR projections suggest the UK economy will expand by 0.8% this year, marginally higher than the fiscal watchdog’s autumn forecast. Next year’s growth rate was also revised upwards to 1.9% compared to the 1.4% figure previously predicted.

 

Cost-of-living measures

The Chancellor also announced a series of measures designed to help families deal with cost-of-living pressures. These included: an extension to the Household Support Fund at current levels for a further six months; maintaining the ‘temporary’ 5p cut on fuel duty and freezing it for another 12 months; an extension of the freeze in alcohol duty until February 2025; an extension in the repayment period for new budgeting advance loans from 12 months to 24 months, and abolition of the £90 charge for a debt relief order.

 

Personal taxation, savings and pensions

Following previous changes to National Insurance Contributions (NICs) from January 2024, the government announced further changes to take effect this April:

  • The main rate of employee NICs will be cut by 2p in the pound from 10% to 8%, which, when combined with the 2p cut that took effect in January, is estimated to save the average salaried worker around £900 a year
  • There will be a further 2p cut from the main rate of self-employed NICs on top of the 1p cut announced at the Autumn Statement
  • This means that from 6 April 2024 the main rate of Class 4 NICs for the self-employed will reduce from 9% to 6%. Combined with the abolition of the requirement to pay Class 2 NICs, this will save an average self-employed person around £650 a year.

To remove unfairness in the system, changes to Child Benefit were announced:

  • The Child Benefit system will be based on household rather than individual incomes by April 2026
  • From April 2024 the threshold for the High Income Child Benefit Charge will be raised to £60,000 from £50,000, taking 170,000 families out of paying this charge
  • The rate of the charge will also be halved, so that Child Benefit is not lost in full until an individual earns £80,000 per annum
  • The government estimates that nearly half a million families will gain an average of £1,260 in 2024/25 as a result.

 

The government announced two savings products to encourage UK savings – a new UK Individual Savings Account (ISA) and British Savings Bonds:

  • The new ISA will have a £5,000 annual allowance in addition to the existing ISA allowance and will be a new tax-free product for people to invest in UK-focused assets
  • British Savings Bonds will be delivered through National Savings & Investments (NS&I) in April 2024, offering a guaranteed interest rate, fixed for three years.

 

Expressing concern that, across the pensions industry, investment into UK equities is only around 6%, the Chancellor announced plans to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations, including UK equities, working closely with the Financial Conduct Authority (FCA) to achieve this.

 

The non-dom tax regime, available to some UK residents with permanent domicile overseas, is to be abolished. From April 2025, new arrivals to the UK will not have to pay tax on foreign income and gains for the first four years of their UK residency. After that, they will pay the same tax as other UK residents. Transition arrangements will be allowed for current non-doms.

 

In addition:

  • As previously announced in the Autumn Statement, the government is working to bring forward legislation by the end of the summer to allow people to invest in a diverse range of investment types through their ISAs
  • The existing ISA allowance remains at £20,000 and the JISA (Junior ISA) allowance and Child Trust Fund annual subscription limits remain at £9,000
  • The Dividend Allowance reduces to £500 from April 2024
  • The annual Capital Gains Tax (CGT) exemption reduces to £3,000 from April 2024
  • The standard nil rate Stamp Duty Land Tax threshold for England and Northern Ireland is £250,000 and £425,000 for first-time buyers, remaining in place until 31 March 2025
  • The Income Tax Personal Allowance and higher rate threshold remain at £12,570 and £50,270 respectively until April 2028 (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
  • There will be a consultation on moving to a residence-based regime for Inheritance Tax (IHT). No changes to IHT will take effect before 6 April 2025 – £325,000 nil-rate band, £175,000 main residence nil-rate band, with taper starting at £2m estate value
  • From 1 April 2024, personal representatives of estates will no longer need to take out commercial loans to pay IHT before applying to obtain a grant on credit from HMRC
  • The State Pension, as previously announced, will go up by 8.5% in April, which means £221.20 a week for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016) and £169.50 a week for the full, old basic State Pension (for those who reached State Pension age before April 2016)
  • The removal of the Lifetime Allowance (LTA) from pensions tax legislation from April
  • As previously announced, the National Living Wage for over-23s – paid by employers – will rise from £10.42 an hour to £11.44 an hour in April.

Business measures

Various business measures announced included the raising of the threshold at which small businesses must register to pay VAT from £85,000 to £90,000 from April 2024. In addition, the Recovery Loan Scheme for small businesses will be extended until March 2026.

 

Property taxation

The Chancellor also announced the government’s plans to make the property tax system fairer, by:

  • Abolishing the Furnished Holiday Lettings tax regime
  • Abolishing Stamp Duty Land Tax Multiple Dwellings Relief from 1 June 2024
  • Reducing the higher rate of CGT on residential properties from 28% to 24%.

Public services

“Good public services need a strong economy to pay for them, but a strong economy also needs good public services.” This is how the Chancellor introduced the government’s “landmark” Public Sector Productivity Plan which, it says, will restart public sector reform and change the Treasury’s traditional approach to public spending.

Our National Health Service is, said Mr Hunt, “rightly the biggest reason most of us are proud to be British.” He announced £3.4bn to modernise NHS IT systems, which is forecast to unlock £35bn of savings by 2030 and boost NHS productivity by almost 2% per year between 2025/26 and 2029/30.

This includes:

  • Modernising NHS IT systems
  • Improvements to the NHS app to allow patients to confirm and modify appointments
  • Piloting the use of AI to automate back-office functions
  • Moving all NHS Trusts to electronic patient records
  • Over 100 upgraded AI-fitted MRI scanners to speed up results for potentially 130,000 patients per year.

 

The Chancellor announced a £2.5bn funding boost for the NHS in 2024/25, allowing the service to continue its focus on reducing waiting times for patients.

Mr Hunt also announced £800m of additional investment to boost productivity across other public services, including:

  • £230m for drones and new technology to free up police officers’ time for frontline work
  • £75m to roll out the Violence Reduction Unit model across England and Wales
  • £170m for the justice system, including £55m for family courts, £100m for prisons and £15m to reduce administrative burdens in the courts
  • £165m to fund additional children’s social care placements
  • An initial commitment of £105m to build new special free schools.

Other key points

  • New duty on vaping products to be introduced from October 2026
  • Tobacco duty will be increased from October 2026
  • Air Passenger Duty adjustments to non-economy class rates from 2025/26
  • Energy Profits Levy one year extension from 1 April 2028 to 2029
  • Boosting local growth through a continuation of the Investment Zones programme
  • £1bn in additional tax relief over the next five years for creative industries
  • Housing investment including £124m at Barking Riverside and £118m to accelerate delivery of the Canary Wharf scheme (including up to 750 homes)
  • £120m for the Green Industries Growth Accelerator (GIGA)
  • £7.4m upskilling fund pilot to help SMEs develop AI skills of the future
  • Extension to Freeport tax reliefs to September 2031
  • Extension to and deepening of devolution in England, including the North East Trailblazer Devolution Deal
  • HMRC to establish an advisory panel to support the administration of the R&D tax reliefs.

 

Closing comments

Jeremy Hunt signed off his Budget saying he was delivering, “A plan to grow the economy, a plan for better public services, a plan to make work pay… Growth up, jobs up and taxes down. I commend this Statement to the House.”

 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding of the Budget taxation and HMRC rules and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

All details are believed to be correct at the time of writing (6 March 2024)

 

 

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

Economic Review – February 2024

Economic Review – February 2024

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Survey suggests recession already over

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Official statistics released last month showed the UK economy fell into recession during the second half of last year, although more recent survey data does suggest the recession could already be over.

 

The latest gross domestic product (GDP) figures published by the Office for National Statistics (ONS) showed the economy shrank by a larger than expected 0.3% during the final quarter of last year. This follows a 0.1% contraction between July and September, thereby pushing the UK into a technical recession – defined as two consecutive quarterly falls in GDP.

 

ONS data also revealed the economy experienced little growth across the whole of last year. In total, it grew by just 0.1% over the course of 2023 which, excluding the pandemic years, represents the weakest annual rate of growth since 2009.

 

The start of this year, however, has seen clear signs of a rebound in growth prompting suggestions that the recession may prove short-lived. Bank of England (BoE) Governor Andrew Bailey, for instance, recently told MPs on the Treasury Committee that the economy is showing “distinct signs of an upturn” and that the recession looks like being the weakest of modern times “by a long way.”

 

Data from the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI) also paints a more positive picture reporting strong service sector growth and business optimism at a two-year high. The preliminary headline growth indicator also rose, up from 52.9 in January to 53.3 in February, beating analysts’ expectations and pointing to an upturn in economic growth.

 

S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The survey data points to the economy growing at a quarterly rate of 0.2-0.3% in the first quarter of 2024, allaying fears that last year’s downturn will have spilled over into 2024 and suggesting that the UK’s ‘recession’ is already over.”

 

 

 

High interest rates ‘under review’

 

 

Last month, the Bank of England (BoE) once again kept interest rates at a 16-year high, although policymakers did signal they were open to the possibility of lowering rates for the first time since the pandemic. 

 

On 1 February, the BoE’s Monetary Policy Committee (MPC) announced it had voted to maintain Bank Rate at 5.25% following its latest deliberations. This decision, however, was not unanimous, with a three-way split emerging on the nine-member panel, two voting to raise rates by 0.25%, one preferring a similar-sized reduction and six opting to leave rates unchanged.

 

This meant the meeting was the first since 2020 when any policymaker had voted to reduce borrowing costs and the minutes also signalled a potential change of course – previous guidance stating that rates could rise again was withdrawn while a concluding sentence stated the MPC ‘will keep under review for how long Bank Rate should be maintained at its current level.’

 

Last month’s release of inflation data also raised hopes that the Bank may begin cutting rates soon. The headline annual CPI rate unexpectedly held firm at 4.0% in January, defying economists’ predictions that it would rise to 4.2%. Indeed, after release of the consumer prices data, investors put a 72% chance of a first interest rate reduction in June, with a 0.25% cut fully priced in for August.

 

While the past few weeks have seen several MPC members suggest there needs to be more evidence of weaker price pressures before rates can be cut, the BoE’s Governor did recently describe market expectations that the Bank would start reducing rates this year as “not unreasonable.” The latest poll conducted by Reuters suggests economists now expect the BoE to begin cutting rates in the third quarter, with a slim majority predicting the first cut will be delivered in August.

 

 

 

Markets (Data compiled by TOMD)

 

At the end of February, markets closed in mixed territory as investors processed a raft of data including US inflation, jobless claims and UK earnings. 

Across the pond, data released at month end showed US prices increased at the slowest rate in nearly three years, keeping a June interest rate cut from the Federal Reserve on the table, while jobless claims rose. The Dow closed February up 2.22% on 38,996.39, with the tech-orientated NASDAQ closing the month up 6.12% on 16,091.92.

 

On home shores, the blue chip FTSE 100 index closed February on 7,630.02, a small loss of 0.01%, meanwhile the FTSE 250 ended the month 1.57% lower on 19,054.87. The FTSE AIM closed on 736.50, a loss of 2.42% in the month.

On the continent, the Euro Stoxx 50 ended February on 4,877.77, 4.93% higher. In Japan, the Nikkei 225 continued its bull run, concluding the month on 39,166.19, a gain of 7.94%. The index ended lower on the last trading day of the month ahead of the release of key US inflation data.

 

On the foreign exchanges, the euro closed the month at €1.16 against sterling. The US dollar closed at $1.26 against sterling and at $1.08 against the euro.

 

Brent crude ended the month trading at around $82 a barrel, a gain of 1.61%. The price per barrel has remained relatively stable within a narrow range over the last few weeks. Gold closed February trading around $2,048 a troy ounce, a small loss in the month of 0.25%. The price was supported by a softening in the US core price index at month end.

 

 

Index                                                  Value (29/02/24)                           Movement since 31/01/24

 

FTSE 100                                            7,630.02                                                           -0.01%                               

FTSE 250                                           19,054.87                                                         -1.57%                               

FTSE AIM                                          736.50                                                               -2.42%

Euro Stoxx 50                                  4,877.77                                                           +4.93%

NASDAQ Composite                      16,091.92                                                         +6.12%                

Dow Jones                                        38,996.39                                                         +2.22% 

Nikkei 225                                        39,166.19                                                         +7.94%

 

 

 

Wage growth slows again

 

Earnings statistics published last month showed that nominal pay is now rising at the weakest pace for more than a year with survey data suggesting this decline looks set to continue.

 

According to the latest ONS figures, average weekly earnings excluding bonuses rose at an annual rate of 6.2% across the final three months of 2023. Although this figure was slightly ahead of analysts’ expectations, it was notably lower than the 6.7% figure recorded in the three months to November 2023 and represents the slowest rate of increase since the August to October 2022 period.

 

Survey evidence also points to an expected further slowdown in levels of pay growth. Data recently released by XpertHR, for instance, showed that the median basic pay settlement fell to 5.1% in the three months to the end of January; this represents a significant drop from the 6.0% rate recorded during the previous three-month period.

 

In addition, research from the Chartered Institute of Personnel and Development (CIPD) suggests employers expect to raise basic pay by an average of 4% over the coming year. This is well below the 5% figure reported across 2023 and signals the first drop in this measure for nearly four years.

 

 

 

Retail sales rebound in January

 

The latest batch of retail sales statistics suggest consumers have recovered some of their appetite for spending, with much stronger than expected growth in sales volumes recorded at the start of the new year.

 

According to ONS figures published last month, total retail sales volumes rose by 3.4% in January compared to the previous month. ONS said this growth, which was significantly above the 1.5% consensus forecast predicted in a Reuters poll of economists, was driven by strong supermarket sales and shoppers taking advantage of new year bargains.

 

Commenting on the day the figures were released, British Retail Consortium Director of Insight Kris Hamer called the news “promising.” He also suggested the growth reflected “rising levels of consumer confidence, as well as a boost from the January sales.”

 

The latest CBI Distributive Trades Survey also painted a more positive picture of the retail sector, with its headline measure of sales volumes in the year to February rising to -7% from -50% in January. This marked the slowest rate of decline in year-on-year sales for ten months. Looking further ahead, however, the survey did strike a note of caution with retailers expecting sales to contract at a slightly faster pace in March.

 

 

 

All details are correct at the time of writing (01 March 2024)

 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

Economic Review – January 2024

Economic Review – January 2024

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UK economy rebounds in November

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Official statistics show the economy returned to growth in November, although analysts believe it remains a close call as to whether or not the UK will once again manage to avoid a recession.

 

Figures released last month by the Office for National Statistics (ONS) showed the UK economy grew by 0.3% in November following a contraction of a similar magnitude during the previous month. ONS said the services sector led the rebound, with Black Friday providing a boost to retailers, warehousing and couriers, while car leasing and computer games firms also enjoyed a buoyant month.

 

Despite November’s bounce back, ONS noted that the longer-term picture remains one of little growth over the past year. Indeed, output actually shrank by 0.2% in the three months to the end of November, and the statistics agency said a contraction or even flat data in December could lead to a second successive quarter of falling output, and thereby tip the economy into a shallow technical recession.

 

Data from the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI) released towards the end of last month, however, paints a more positive picture with business confidence rising to its highest level since last May. The preliminary headline economic growth indicator also rose, up from 52.1 in December to 52.5 in January, beating analysts’ expectations and pointing to a stronger than expected start to 2024 for the UK economy.

 

Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “UK business activity growth accelerated for a third straight month in January, according to early PMI survey data, marking a promising start to the year. The survey data point to the economy growing at a quarterly rate of 0.2% after a flat fourth quarter, therefore skirting recession and showing signs of renewed momentum.”

 

 

 

Surprise uptick in inflation rate

 

Last month’s release of consumer price statistics revealed a small increase in the UK headline rate of inflation, bucking analysts’ expectations for a further easing in price pressures.

 

Data published by ONS showed the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – stood at 4.0% in December. This was up from November’s 3.9% figure and was also higher than the 3.8% consensus forecast from a Reuters poll of economists.

 

ONS said the increase, which represented the first inflation uptick in 10 months, was partly driven by a sharp rise in tobacco prices due to duty increases. There were also material upward contributions from the recreation, airfare and clothing sectors, although these were partially offset by a fall in food inflation with prices in this sector still rising but at a much lower rate than in the comparable period last year.

 

Analysts typically expect January’s inflation rate to rise as a result of base effects and there are a number of notable risks to the outlook particularly relating to disruption of shipping in the Red Sea. However, most economists are still predicting the downward trajectory will resume with potentially large declines forecast this spring.

 

Capital Economics, for instance, recently suggested CPI inflation could drop below 2% by April. The independent research firm also said this could result in the UK’s pace of price growth actually breaching the 2% mark before both the US and Eurozone.

 

While December’s inflation rise did dent market expectations of an early cut in interest rates, analysts do still typically expect the Bank of England to sanction a series of rate reductions this year. Indeed, a recent Reuters poll found that just over half of economists expect the first cut to be sanctioned before mid-2024.

 

 

Markets (Data compiled by TOMD)

 

Major global indices were mixed at the end of January. On the last trading day of the month the FTSE 100 lost ground ahead of imminent interest rate decisions in the UK and US.

In the UK, the FTSE 100 index closed the month on 7,630.57, a loss of 1.33%, while the mid cap orientated FTSE 250 closed January 1.68% lower on 19,357.95. The FTSE AIM closed on 754.75, a loss of 1.12% in the month.

On 31 January, the Federal Reserve decided to retain interest rates for another month, whilst making it clear that it needs to see more progress on inflation before reducing borrowing costs. The Dow closed the month up 1.22% on 38,150.30, while the tech-orientated NASDAQ closed January up just over 1% on 15,164.01. At month end the broader market came under pressure as technology stocks failed to live up to expectations.

Meanwhile, the Euro Stoxx 50 closed the month 2.80% higher, on 4,648.40. The Nikkei 225 ended January on 36,286.71, up 8.43%. During the month, Japan’s benchmark index broke past the 35,000 mark, for the first time since February 1990.

On the foreign exchanges, the euro closed the month at €1.17 against sterling. The US dollar closed at $1.27 against sterling and at $1.08 against the euro.

 

Gold closed the month trading around $2,053 a troy ounce, a monthly loss of 1.21%. Brent crude closed January trading at around $80 a barrel, a monthly gain of 4.87%. Oil posted its first monthly gain since September.

 

 

32Index                                                            Value (31/01/24)                           Movement since 29/12/23

 

FTSE 100                                            7,630.57                                                           -1.33%                               

FTSE 250                                           19,357.95                                                         -1.68%                               

FTSE AIM                                          754.75                                                               -1.12%

Euro Stoxx 50                                  4,648.40                                                           +2.80%

NASDAQ Composite                      15,164.01                                                         +1.02%                

Dow Jones                                        38,150.30                                                         +1.22% 

Nikkei 225                                        36,286.71                                                         +8.43%

 

 

 

 

Government borrowing lower than expected

 

The latest public sector finance statistics revealed a smaller-than-expected budget deficit providing the Chancellor with more room for manoeuvre as he prepares to deliver his Spring Statement in March.

 

ONS data showed government borrowing fell to £7.8bn in December, nearly half the level predicted in a Reuters poll of economists. This left the fiscal year-to-date total at £119bn, almost £5bn below the Office for Budget Responsibility’s November forecast produced for the Autumn Statement, principally as a result of lower than anticipated inflation reducing debt interest payments.

 

Prior to release of the data, the Chancellor had hinted at potential pre-election tax cuts when he delivers his Spring Budget on 6 March. Speaking during a visit to the World Economic Forum in Davos, Mr Hunt said he wanted to move in the direction of cutting taxes and noted that countries with lower taxes “are more dynamic, more competitive and generate more money for public services.”

 

Analysis released late last month by the Institute for Fiscal Studies, however, suggests the next government is likely to face the toughest challenge since the 1950s to bring down the country’s high debt burden. The economic think tank also warned that tax cuts now could compound the problem.

 

 

 

 

Retail sales fall sharply

 

Data released last month by ONS revealed that the UK retail sector suffered its sharpest decline in sales volumes for almost three years.

 

Official retail sales statistics showed sales volumes fell by 3.2% in December; this figure was worse than all predictions in a Reuters poll of economists with the consensus forecast pointing to a 0.5% fall. The monthly decline was also the largest since January 2021 when the reintroduction of pandemic restrictions heavily impacted sales. While ONS did say people appeared to have shopped earlier this year in order to take advantage of Black Friday sales, they also noted evidence of consumers spending less on gifts while food sales also notably declined in the run-up to Christmas.

 

The latest CBI Distributive Trades Survey suggests the retail environment remains extremely challenging with year-on-year sales volumes in January falling at the fastest pace since the pandemic. The survey also found that retailers anticipate a similar rate of contraction in February.

 

CBI Principal Economist Martin Sartorius said, “Retailers reported a further deterioration in activity at the start of 2024. Looking ahead, demand conditions in the sector will remain challenging as higher interest rates continue to feed through to mortgage payments and household incomes.”

 

 

All details are correct at the time of writing (01 February 2024)

 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission

 

 

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

Your Finance Matters – Q1 Winter 2024

Your Finance Matters – Q1 Winter 2024

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Preparing portfolios for resilience in 2024

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The past few years have been challenging for investors with a series of unforeseen events and rising geopolitical tensions weighing heavily on global markets and, as a new year dawns, many issues remain unresolved. However, while such times are disconcerting for investors, the best way to achieve financial empowerment is by sticking to a sound strategic plan that optimises investment decisions and thereby tackles any potential issues head on.

 

Geopolitical risk

Although it may sometimes feel we are living through unprecedented times, geopolitical risk is not a new phenomenon – it has always been a feature of the investment landscape. Russia’s invasion of Ukraine and, more recently, the Middle East conflict, however, are both clearly major events most people did not foresee. And, when such events do occur, even the most well-informed investors find it difficult to accurately predict their impact on markets and investment portfolios.

 

Economic prospects

The global economy is currently in a relatively precarious position with the long-term consequences of the pandemic, war in Ukraine and the Middle East, and increasing geoeconomic fragmentation hindering prospects. The International Monetary Fund’s assessment, for example, produced just before October’s Middle East conflict erupted, points to an easing of growth across advanced economies this year, while China looks set to experience its slowest growth rate for years.

 

Investment pragmatism

While geopolitical events need to be closely monitored, investors must also be disciplined with any changes to investment strategy based on hard facts rather than knee-jerk reactions to the latest news headlines. The key to successful investing is undoubtedly to focus on long-term objectives and mitigate any potential risks by maintaining a well-diversified portfolio spread across different asset classes, industries and geographical regions.

 

New year, new opportunities

While geopolitical tensions are expected to present ongoing challenges, as 2024 unfolds new investment opportunities will inevitably become available. We’ll be on hand throughout the year to help you make the most of any opportunities, by carefully repositioning your portfolio and ensuring it remains firmly aligned with your financial objectives.

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

 

 

Global dividends – encouraging growth?

 

A new study1 analysing global dividend trends has highlighted that, in the third quarter of last year, 89% of companies chose to maintain their dividend levels or raise them. Despite this, it was noted that during the quarter, global dividends reduced by 0.9% (on a headline basis) to total $421.9bn.

 

The underlying growth of dividends, paid by the world’s 1,200 largest firms measured by market capitalisation, was recorded at 0.3% in Q3 2023; this follows adjustments for the strengthening US dollar and for special dividends. Interestingly, the overall growth rate was ‘significantly impacted’ by a diminutive number of large dividend cuts; the report noted that this ‘masked encouraging growth across the wider market.’ If you exclude the two largest dividend reductions, for example, underlying growth was 5.3%.

 

From a year-on-year perspective, the 2023 headline forecast has been reduced from $1.64trn to $1.63trn, also reflective of reduced special dividends and a stronger US dollar, and ‘not a cause for concern,’ according to the report. Head of Global Equity Income at Janus Henderson, Ben Lofthouse, signalled that, “dividend growth from companies generally remains strong across a wide range of sectors and regions,” adding that the data highlights “a globally diversified income portfolio has natural stabilisers,” as sectors in ascendance are “able to counteract those with declining dividends,” before concluding, “Dividends are typically much less volatile than earnings over time, providing comfort in times of economic uncertainty.”

 

1Janus Henderson, 2023

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

 

 

In the news

 

Who wants to be an (ISA) millionaire?

The number of ISA millionaires – i.e. people who have built up a tax-free pot of £1m or more by investing in stocks and shares ISAs – has almost quintupled since 2017, with the figure now standing at 2,7602. With the first ISAs introduced in 1999 aimed at encouraging more people to save, the data certainly suggests the objective is being satisfied for an increasing number, with the most recent data suggesting around 11.8 million adults were subscribed to an ISA in 2021/22, making £66.9bn deposits in that tax year.

 

More people choose living inheritances

There has been an increase in the number of people who are choosing to gift significant sums of money to beneficiaries whilst they are still alive – otherwise known as a ‘living inheritance.’ One in 10 respondents to the Great British Retirement Survey 20233 said they had given a living inheritance in the past three years. This increased to 15% amongst over-65s.

 

One million more over-65s still at work

There are now nearly a million more people over the age of 65 in the UK labour market compared with the number still at work in the year 20004. This is according to the Centre for Ageing Better, which has calculated that 976,000 workers over the age of 65 and 3.1 million aged 50-64 have been added to the workforce since the Millennium. It is thought that the UK’s ageing population, in addition to changes in the State Pension age, are mostly responsible for the increasing numbers of older workers in the UK’s labour force over the past few decades.

 

2HMRC, 2023

3Interactive Investor, 2023

4Centre for Ageing Better, 2023

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.

 

 

The financial pitfalls that primarily affect women

 

Research5 has shone a spotlight on the financial challenges that prevent women from accumulating the same wealth as their male counterparts.

 

The report found that having children continues to have a disproportionately large impact on women’s finances, as do other life events such as the menopause.

 

The findings

Amongst the report’s findings were the following statistics:

 

  • A quarter of women continue paying into their pension at the same rate during parental leave, vs 70% of men

 

  • Caring responsibilities (outside of childcare) have financially impacted nearly half of women

 

  • One in 20 menopausal women have quit work due to their symptoms

 

  • Only 55% of women return to work full time after their first child, compared to 90% of men.

 

Of course, no two women are the same and each will face different challenges on her journey to financial wellbeing. However, these statistics show that there are common threads here. Women continue to take the lion’s share of caring responsibilities, taking them out of the workplace and reducing their financial security not only in the present, but as they approach retirement as well.

 

Let’s do something about it – together

Despite the financial challenges women face, they remain less likely than men to seek professional financial advice6. As we move into 2024, make a New Year’s resolution – let this be the year that you empower yourself to succeed and get your finances on track for a prosperous future.

 

5AJ Bell, 2023

6Canada Life, 2022

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

 

 

The sophisticated scammers targeting YOU

 

According to a study from NatWest7, seven in 10 people have been targeted by scams over the last 12 months. Vulnerabilities brought on by cost-of-living challenges have likely contributed to the high numbers.

 

Sadly, 13% of people have fallen prey to such scams, which are growing in both number and sophistication – targeting young and old – no one is immune.

 

Avoid, avoid, avoid

To avoid a scam, you’ve first got to know what you’re looking for. So, here’s a list of the most common scams used over the past year and the proportion of people who were targeted:

 

  1. Phishing scams (37%)

Fake emails or calls from organisations purporting to be from legitimate companies, asking you to provide personal or private data.

 

  1. Trusted organisation scams (21%)

Criminals contact their victims pretending to be trusted organisations such as HMRC, the police or their bank, saying there’s something wrong with their account, they need to pay a fine, or similar.

 

  1. Refund scams (13%)

Similar to the above, but the criminals instead use a potential refund or rebate to tempt victims into sharing personal or banking information.

 

Other scams include messages purporting to be from friends/family asking for money (12%), get rich quick scams (12%) and purchase scams (9%).

 

Keep yourself (and your money) safe

Staying vigilant and keeping your guard up around unsolicited calls and messages is key to protecting yourself from scams. Remember:

 

  • If something seems too good to be true, it probably is

 

  • Your bank will never ask you to disclose your full PIN or password

 

  • Don’t respond to unsolicited calls, emails or texts, or open links if you feel suspicious

 

  • We’re always here to help if you’re ever unsure about something.

 

Always be alert to the risk of fraud – double check any details to ensure people or organisations are who you think they are. Stay vigilant, protect yourself – knowledge is power.

 

7NatWest, 2023

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.

 

 

Are you due a midlife MOT?

Just to be clear, we’re not talking about your physical health here (that’s the doctor’s remit). We’re talking about a check-up to assess your financial wellbeing.

And we’re asking because nearly one in six people aged between 45 and 54 are now making significant financial sacrifices to ensure their pension pots are up to scratch for retirement8. At the same time, they are still juggling a multitude of other financial responsibilities, including childcare and mortgages, at a time when cost of living pressures persist.

 

Just like you’d go to the doctor for a check-up if you were feeling a bit run down, a financial MOT could be just what you need at this crucial time in your life to ensure your finances are working for you.

 

Here are some key aspects to think about:

 

  1. Retirement planning – as you approach retirement, now is the time to take stock of your pension savings to ensure you’re on track for your goals

 

  1. Protection – your health needs can change as you get older, so a review of your protection cover could be a good idea to ensure you and your family are properly protected

 

  1. Debt management – a review can help you assess your current debts and work out how to best pay them off

 

  1. Investments – are your investments working for you? Can your portfolio be rebalanced to better align with your risk profile and long-term financial objectives?

 

  1. Estate planning – now is also an excellent time to review your long-term plans for passing your wealth onto the next generation and to make a Will and Lasting Power of Attorney (LPA).

 

Here to help

If a midlife MOT sounds like it might benefit you, then please do give us a call – we’re on hand to help you review each aspect of your finances and develop a comprehensive financial plan.

 

8Phoenix Group, 2023

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

 

 

Planning for a secure financial future

 

Over the past 12 months, the cost-of-living crisis has put significant pressure on household budgets and knocked many people’s confidence in their future financial prospects. Research, however, shows that planning is a key driver of positivity about our financial futures; so, as a new year dawns, now seems the perfect time to take stock of your finances and formulate a plan to help you achieve your retirement goals.

 

Plan, plan, plan

Although decisions around retirement are arguably the most critical people have to make during their whole lives, research9 suggests only half of over-50s with pension entitlements other than the State Pension have actually formulated a detailed plan. Perhaps unsurprisingly, it also found that those with a plan were much more confident about securing a comfortable retirement than those who do not have one.

 

Gender gap

The research found clear evidence of a gender gap with men generally more confident about their prospects for a comfortable retirement than their female counterparts. It also found that the

cost-of-living crisis has been a key driver of low confidence, with half of the sample stating that it has either slightly or significantly worsened their chances of a comfortable retirement.

 

Triple default trap

People without a plan are also more likely to get stuck with their default pension settings. Recent years are thought to have seen a sharp rise in the number of triple defaulters who ‘set and forget’ their pension choices, with millions of auto-enrolled 32-40 year olds failing to update their contributions, investment choices or target retirement age. Even relatively small tweaks to one or more of these default choices could potentially boost a pension pot by thousands of pounds.

 

Here to support you

The evidence clearly shows that formulating a plan is the key to boosting confidence in your financial future. So, let’s kick off 2024 on a positive footing ‒ get in touch and we’ll help you develop a plan capable of securing the rewarding retirement you deserve.

 

9Nucleus Financial Platforms, 2023

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

 

 

Prospects of stronger economic growth

 

As we enter a new year, the global economy sits in a relatively precarious position, with the long-term consequences of the pandemic, as well as ongoing conflicts and geopolitical tensions all hindering growth prospects. While such times can appear daunting for investors, the key to successful investing actually remains the same: focus on long-term goals and mitigate potential risks by maintaining a well-diversified portfolio.

 

Global recovery remains slow

In its latest assessment of economic prospects, produced just before the Middle East conflict began, the International Monetary Fund (IMF) dampened its baseline global growth forecast for the coming year. The international soothsayer is now predicting growth will slow from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024; all three figures are below the long-term average global growth rate of 3.8%.

 

Challenges ahead but growth prospects

The IMF noted that the current weak growth outlook allied with heightened uncertainty, still-elevated global inflation and limited fiscal space, do pose a series of challenges for policymakers. However, the report also highlighted some more upbeat aspects including disinflation, rebuilt buffers to help manage future shocks and the prospect of stronger, more balanced growth.

 

Diversification is key

In the current economic climate, strong research capabilities are clearly vital and that is our strength. It enables us to formulate and develop an effective investment plan tailored specifically to your needs, and helps us ensure you continue to hold a well-diversified, balanced portfolio firmly aligned to your long-term financial objectives.

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

 

 

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases

of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

 

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

 

The Financial Conduct Authority does not regulate advice on deposit accounts and some forms of tax advice.

 

All details are correct at time of writing – December 2023.

 

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

What employee benefits can I offer in my business?

What employee benefits can I offer in my business?

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We speak to many small business owners who want to offer the right employee benefits to be competitive in their small business. They want to be able to recruit good people and keep those they have. As well as the right salary they are exploring the different options to create an attractive employment package.

There are many types of benefits you can offer, here are some of the options:

Flexible and hybrid working

This has become increasingly popular since lockdown, as many workplaces were able to move to working from home. Since then, many employers have explored a range of different options, and have found that offering a more flexible approach to working hours and locations can help them retain loyal employees.

Health insurance

This is an employment benefit that many corporate businesses have offered for years, but small businesses are able to tap into this growing market. Health benefits included in a company insurance policy can include dental and optical cover, access to GP appointments, private medical treatment, outpatient treatments such as scans and specialist consultations, physiotherapy, mental health support and menopause support. Some health insurance policies pay a small fixed amount for each night employees spend in an NHS hospital. Employers appreciate being able to tailor the package to their workforce, for example optical cover for employees who spend much of their working day at a screen.

Life insurance

As part of your employee benefits package you can include life cover, also called death in service cover. This provides a lump sum to loved ones if an employee dies while employed in your business.

Group pensions

Group personal pensions are a type of defined contribution pension. Members in a group pension scheme build up a personal pension pot, which they then take money from when they retire. Schemes can include employee contributions or you may wish to offer it as a non-contributory scheme.

Gym membership and bike to work schemes

These can be offered as part of a focus on employee wellbeing in your workplace. A bike to work scheme can give employees access to a new bike as part of a salary sacrifice arrangement.

Discounts on products or services

These can be some of the most popular employee benefits, depending on what your small business does.

Childcare vouchers

Employers who are looking to recruit parents may find it helpful to offer a childcare voucher scheme

No matter the size of your workforce, we can help you create a competitive package. We partner with Fiona Amadi of Pearl Rose Insurance who specialises in employee benefits. Packages can be structured to suit you and your budget and can start from much less than you may think.

There are so many different providers out there to choose from, each with their own benefits and stipulations, which is why we go through the details together, making advisements as we go, in order to find a plan to suit you best. Making the whole thing as simple and straightforward as possible.

 

Get in touch to talk to us about your employee benefits options.

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

Economic Review October 2023 – Inflation rate holds steady

Economic Review October 2023 – Inflation rate holds steady

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Download your copy here

 

The Bank of England (BoE) Governor has described the latest batch of inflation statistics as “quite encouraging,” adding that he expects a “noticeable drop” in the headline rate when the next set of data is released later this month.

 

Figures recently published by the Office for National Statistics (ONS) revealed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – held steady at 6.7% in September. This ended a run of three consecutive monthly declines and came in slightly ahead of analysts expectations’ of a further 0.1% fall.

 

ONS pointed out that the figures did include the first monthly decline in food price levels for two years. However, a sharp rise in fuel costs between August and September was the main factor that prevented the CPI annual rate from declining again. Despite remaining unchanged, though, September’s update does leave CPI below the level forecast by the BoE in early August.

 

The latest release did also report a fall in core inflation, which excludes volatile elements such as energy, food, alcohol and tobacco, although this decrease was again less than economists had predicted. This measure of inflation, which is typically viewed as a better guide to longer-term price trends, fell to 6.1% in September from 6.2% in August.

 

Commenting on the consumer prices data release in an interview with the Belfast Telegraph, BoE Governor Andrew Bailey said, “It was not far off what we were expecting. Core inflation fell slightly from what we were expecting and that’s quite encouraging.” The Governor also stressed that he expects to see a “noticeable drop” in the CPI rate when the next set of figures are published in mid-November as last year’s sharp hike in energy prices drops out of the annual comparison.

 

 

Economy stages partial rebound

 

Growth statistics released last month by ONS showed the UK economy returned to growth in August following a sharp decline in July, although forward-looking indicators continue to suggest the outlook remains uncertain.

 

According to the latest gross domestic product (GDP) figures, the UK economy grew by 0.2% in August following a downwardly revised fall of 0.6% in July. ONS said August’s modest bounce back was partly driven by the education sector, which recovered from two days of industrial action the previous month, along with a boost from computer programmers and engineers.

 

While analysts typically described the latest GDP data as ‘lacklustre,’ August’s figures are thought to have reduced the possibility of a recession beginning as early as the July to September period. Indeed, ONS noted that the economy would only need to have grown by 0.2% during September to avoid it contracting across the third quarter as a whole.

 

Data from the latest S&P Global/CIPS UK Purchasing Managers’ Index released towards the end of last month, however, does suggest that business activity across the private sector continues to weaken. The preliminary composite headline Index stood at 48.6 in October, a marginal increase from September’s figure of 48.5, but below the 50 threshold that denotes a contraction in private sector output for the third month running.

 

Commenting on the survey’s findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The UK economy continued to skirt with recession in October, as the increased cost of living, higher interest rates and falling exports were widely blamed on a third month of falling output. The overall pace of decline remains only modest, but gloom about the outlook has intensified in the uncertain economic climate, boding ill for output in the coming months. A recession, albeit only mild at present, cannot be ruled out.”

 

 

Markets (Data compiled by TOMD)

 

As October drew to a close, investors focused on major central bank meetings with the Bank of England and Federal Reserve due to meet in early November.

 

In the UK, the FTSE 100 closed October on 7,321.72, a loss of 3.76%. At month end losses in some mining and energy stocks weighed, impacted by declines in commodity prices following weaker-than-expected factory activity data in China. The domestically-focused FTSE 250 closed down 6.54% on 17,083.05, while the FTSE AIM closed the month on 679.85, a loss of 6.38%. On the continent, the Euro Stoxx 50 ended October on 4,061.12, a loss of 2.72%.

 

At month end, Asian equities struggled as disappointing activity data from China reignited some concerns over the resilience of the world’s second largest economy. In Japan the Nikkei 225 closed the month on 30,858.85, down 3.14%.

 

A raft of new data has highlighted resilience in the US economy. Comments from Federal Reserve Chairman Jerome Powell will be closely watched as an indicator of how long interest rates are likely to remain elevated. The Dow Jones Index closed the month down 1.36% on 33,052.87, while the NASDAQ closed the month down 2.78% on 12,851.24.

 

On the foreign exchanges, the euro closed the month at €1.14 against sterling. The US dollar closed at $1.21 against sterling and at $1.05 against the euro.

 

Safe haven demand as a result of the Middle Eastern conflict saw gold prices trading higher in the month. Gold closed October trading at around $1,996 a troy ounce, a monthly gain of around 6.76%. With traders wary of any new developments in the conflict and concerns over slowing fuel demand in China weighing, Brent crude closed the month trading at around $85, a loss over the month of 7.41%.

 

 

Index                                                  Value (31/10/23)                           Movement since 29/09/23

 

FTSE 100                                            7,321.72                                                           -3.76%                               

FTSE 250                                           17,083.05                                                         -6.54%                               

FTSE AIM                                          679.85                                                               -6.38%

Euro Stoxx 50                                  4,061.12                                                           -2.72%

NASDAQ Composite                      12,851.24                                                         -2.78%                               

Dow Jones                                        33,052.87                                                         -1.36% 

Nikkei 225                                        30,858.85                                                         -3.14%

 

 

Jobs market continues to cool

 

Last month’s release of labour market statistics suggests there has been a further softening in the UK jobs market, although earnings data did reveal average pay is now rising above inflation for the first time in almost two years.

 

The latest figures released by ONS were dubbed ‘experimental estimates’ produced under a new calculation that attempts to account for low response rates to the labour force survey. The new data showed that, although the unemployment rate stayed unchanged at 4.2% during the June to August period, the overall level of employment fell and the rate of economic inactivity rose.

 

In addition, the estimated total number of job vacancies dropped by 43,000 during the three months to September, the 15th consecutive reported decline. This reduced the number of vacancies to a two-year low of 988,000, although this figure is still significantly above pre-pandemic vacancy levels recorded in early 2020.

 

The latest earnings figures also revealed that regular pay rose at an annual rate of 7.8% in the June to August period, higher than the average inflation rate over the same three months. Furthermore, data revisions meant that wage growth actually outpaced inflation in the three months to July for the first time since October 2021.

 

 

 

Retail sales in autumnal fall

 

Official retail sales statistics reported a sharper than expected decline in sales volumes during September, while more recent survey evidence suggests the current trading environment remains extremely challenging.

 

Data published last month by ONS revealed that total retail sales volumes fell by 0.9% in September, a much larger decline than the 0.2% fall predicted in a Reuters poll of economists. ONS said it had been ‘a poor month for clothing stores’ with the unseasonable warm autumnal conditions reducing sales of colder weather gear, while the quick pace of price rises had deterred shoppers from buying ‘non-essential goods.’

 

The latest CBI Distributive Trades Survey suggests sales remained weak last month, with retailers reporting the joint-worst level of sales volumes for October since records began in 1983. The survey also found that retailers do not anticipate a turnaround in fortunes this month, with cost-of-living concerns and higher interest rates expected to continue weighing on consumer spending.

 

Commenting on the findings, CBI Principal Economist Martin Sartorius said, “As the festive period approaches, the retail sector remains in a perilous position. While slowing inflation should help to bolster households’ income in the coming months, retailers will continue to face headwinds from higher energy and borrowing costs.” 

 

 

 

All details are correct at the time of writing (01 November 2023 )

 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

 

 

 

 

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

Economic Review September 2023

Economic Review September 2023

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  Download your copy here.

Rate-hike pause as inflation dips

 

 

Last month, the Bank of England announced a pause in its long run of interest rate rises following an unexpected dip in the UK headline rate of inflation and ‘increasing signs’ that higher rates were starting to hurt the real economy.

 

Following its latest meeting, which concluded on 20 September, the BoE’s Monetary Policy Committee (MPC) voted by a narrow margin to leave Bank Rate unchanged at 5.25%. This was the first occasion since December 2021 that an MPC meeting had not resulted in the Bank’s benchmark rate of interest being raised.

 

The decision was clearly a very close call with four of the nine-member committee voting to increase rates by a further 0.25 percentage points. The minutes to the meeting also reiterated that the MPC would be prepared to raise rates again if there was ‘evidence of more persistent inflationary pressures.’ They also repeated previous guidance that monetary policy would remain ‘sufficiently restrictive for sufficiently long’ to return inflation back to its target level.

 

Commenting on the day the decision was announced, BoE Governor Andrew Bailey said, “Inflation has fallen a lot in recent months and we think it will continue to do so.” The Governor did, however, warn against “complacency” and “premature celebration” and added, “We need to be sure inflation returns to normal and we will continue to take the decisions necessary to do just that.”

 

Data published by the Office for National Statistics (ONS) the day before the MPC’s announcement had revealed a surprise fall in inflation. The Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – fell to 6.7% in August, down from 6.8% in July. Most economists had predicted a slight uptick in August’s CPI rate primarily due to a rise in global fuel prices.

 

 

 

UK economy contracts in July

 

 

Gross domestic product (GDP) figures released last month showed the UK economy shrank by a greater than expected amount in July, while forward-looking indicators suggest a recession looks ‘increasingly likely.’

 

The latest monthly GDP statistics produced by ONS revealed that the economy shrank by 0.5% in July. This figure was worse than all forecasts submitted to a Reuters poll of economists with the consensus prediction suggesting the economy would suffer a 0.2% contraction.

 

ONS said July’s weak figure partly stemmed from a reduction in output within the services sector, with this drop driven by the impact of industrial action by NHS workers and teachers. In addition, heavy rainfall across the month also hit activity in both the construction and retail industries.

 

The UK economy has so far avoided recession this year with positive growth numbers recorded across both the first and second quarters. New data released at the end of September confirmed that the UK’s economy grew 0.2% in Q2.

 

The preliminary headline reading from the S&P Global/CIPS UK Purchasing Managers’ Index (PMI) fell from 48.6 in August to 46.8 in September. This represents the sharpest fall in output since January 2021 and, excluding pandemic lockdown months, the steepest decline since the height of the global financial crisis in March 2009.

 

Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement.”

 

 

Markets (Data compiled by TOMD)

 

As September drew to a close, many major global stock markets ended the month in negative territory. During the final trading days of Q3, some European markets were boosted as data indicated the UK’s economy grew in Q2 and inflation across the eurozone is cooling.

 

In the US, the latest consumer confidence and home sales reports fuelled economic concerns and weighed on markets. The Dow Jones Index closed the month down 3.50% on 33,507.50, while the tech-orientated NASDAQ closed the month down 5.81% on 13,219.32.

 

In the UK, the FTSE 100 closed the month on 7,608.08, a gain of 2.27%, while the mid cap focused FTSE 250 closed down 1.75% on 18,279.42. The FTSE AIM closed September on 726.18, a loss during the month of 2.12%. On the continent, the Euro Stoxx 50 closed on 4,174.66, a loss of 2.85%.

 

In Asia, ongoing weakness in China’s property sector continues to weigh on the region. The Japanese Nikkei 225 closed the month on 31,857.62 down 2.34%.

 

              

On the foreign exchanges, the euro closed the month at €1.15 against sterling. The US dollar closed at $1.21 against sterling and at $1.05 against the euro.

 

 

Brent crude closed September trading at around $92, a gain over the month of 6.89%. Russia’s announcement of a temporary ban on gasoline and diesel exports to most countries is bringing uncertainty into the market. Gold closed the month trading at around $1,870 a troy ounce, a monthly loss of around 3.70%.

 

 

 

 

Index                                                  Value (29/09/23)                           Movement since 31/08/23

 

FTSE 100                                            7,608.08                                                           +2.27%                               

FTSE 250                                           18,279.42                                                         -1.75%                               

FTSE AIM                                          726.18                                                               -2.12%

Euro Stoxx 50                                  4,174.66                                                           -2.85%

NASDAQ Composite                      13,219.32                                                         -5.81%                               

Dow Jones                                        33,507.50                                                         -3.50% 

Nikkei 225                                        31,857.62                                                         -2.34%

 

 

 

Retail sector shows signs of recovery

 

 

The latest official retail sales statistics revealed a partial rebound in sales volumes during August while more recent survey evidence highlights ‘elements of optimism’ within the retail sector.

 

According to ONS data published last month, total retail sales volumes rose by 0.4% in August. This growth in the quantity of goods bought by consumers follows July’s 1.1% fall when sales were impacted by an unseasonal spell of wet weather which upset normal summer spending patterns. ONS noted that August’s partial recovery was driven by increased food sales and a strong month for clothing.

 

Recently-released survey data from GfK also shows consumers remain remarkably resilient with sentiment at its highest level since the start of 2022 as households become increasingly hopeful about the economy. The latest CBI Distributive Trades Survey also suggests the retail sector expects to see modest sales improvements in the coming months with one gauge of retailers’ expectations hitting a three-month high.

 

Commenting on the findings, CBI Principal Economist Martin Sartorius said, “There are some elements of optimism in our survey. Lower than expected inflation figures, which in turn will ease pressure on household budgets, will also give retailers some hope going into the crucial autumn and winter trading period.”

 

 

 

 

Chancellor downplays tax-cut hopes

 

 

Analysts have warned that the latest public sector finance statistics leave the Chancellor with little room to offer tax cuts when he delivers his Autumn Statement next month.

 

ONS data recently revealed that government borrowing totalled £11.6bn in August, the fourth highest amount ever recorded for that month. The figure was also £3.5bn more than the government borrowed in the same month last year and was slightly ahead of analysts’ expectations.

 

While inclusion of the latest data does still leave the fiscal year-to-date deficit comfortably below the most recent forecast published by the Office for Budget Responsibility (OBR), analysts typically believe there remains little scope for potential tax cuts in the near future. This reflects the expected economic slowdown, which is likely to hit tax revenues, as well as anticipated upward revisions to OBR projections due to higher debt interest costs.

 

Chancellor Jeremy Hunt also recently acknowledged that rising debt interest payments caused by higher long-term interest rates were putting increased pressure on the public finances. He also admitted it would be “virtually impossible” to include tax cuts in his upcoming fiscal update. Earlier in the month, Mr Hunt announced he will deliver this year’s Autumn Statement on 22 November.

 

All details are correct at the time of writing (02 October 2023 )

 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

Your big goals and how good financial planning can help

Your big goals and how good financial planning can help

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As financial professionals, it’s very easy for us to start by looking at the products our clients may need: the pension, the investment plan, the right insurance policy. We spend our working lives considering the detail of these products, and we know they are the solution to many of our clients’ challenges.

 

But as a financial adviser I am always interested in what my clients want to achieve. These are often the first things we talk about, before we get into the detail of existing plans and policies. I want to hear about your big life plans and goals so I can ensure that your financial arrangements are tailored to help you reach them.

 

I recently achieved a major personal goal, to climb Kilimanjaro. At 5895 metres, it is the highest mountain in Africa and the fourth highest in the world. It was a trip of 8 days, including camping on the mountain side and some very early starts each day. Training for the climb has been a big part of my life for the last year. Many weekends have been spent building up the distance I could comfortably manage to walk each day and climbing some of England’s highest peaks to get comfortable with the gradient. I could not have achieved my big goal without putting all the right planning in place.

 

Financial planning works in much the same way. When I speak to clients about their major goals, we can start to plan out what they need to do in the coming months and years to ensure that when the time comes they are able to achieve the big goal. Everyone’s big goal looks different but over the years there are some common conversations that crop up regularly.

 

I want to exit my business leaving it in safe hands

Many of my clients are small business owners and as they get older they want to be able to reduce the time they are working in the business. In the case of a family business they want to be able to leave it to the next generation. We often talk about pension plans, inheritance planning and key person insurance policies.

 

I want to set my children up for financial security

This conversation happens with many clients, from the point they are new parents all the way to their children graduating and developing their own careers. We all want to ensure our children are provided for. Housing and education costs are particular things that my clients want to help with. I can help with appropriate investment plans when children are younger, financial planning for school fees and inheritance planning later on.

 

To enjoy my retirement

I don’t think I have ever spoken to a client who isn’t anticipating enjoying their life once they have finished work! To fully enjoy your time, it is essential to ensure you have the right pension arrangements and enough put aside to have the lifestyle that you anticipate. The pension market is full of different products, and I spend a lot of time carefully considering the right approach for each client.

 

I’m highly in favour of ensuring that your financial affairs are structured to help you achieve your big goals. If that sounds like a conversation you need to have, please get in touch and we can work out the plan that will get you there.

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

Sheldon Flanders & Pearl Rose insurance partnership announcement

Sheldon Flanders & Pearl Rose insurance partnership announcement

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I am very pleased to announce that Sheldon Flanders Financial Services is now able to offer our clients a full range of employee benefits. We are partnering with Fiona Amadi of Pearl Rose Insurance who specialises in offering group life insurance, health care and income protection policies. Fiona will work closely with the Sheldon Flanders team on behalf of business clients.

This partnership complements our existing expertise in group pension schemes and means that Sheldon Flanders will now be able to help small businesses create competitive employee benefits packages. As it gets increasingly challenging to recruit and retain great staff, we know employers want to look at cost effective ways to attract talented team members. Our combined experience of nearly 50 years means we are well placed to choose from all the different policies in the market and put together the best package for any business owner.

I am very pleased to welcome Fiona to the team. Fiona and I are both committed to improving wellbeing in the workforce, and we are looking forward to working together to supporting small businesses in Derbyshire and beyond.

If you would like to talk to me about how this new partnership can benefit your business please get in touch.

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

Economic Review – August 2023

Economic Review – August 2023

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Download your copy here

UK growth rate exceeds expectations

 

The latest gross domestic product (GDP) statistics revealed that the UK economy grew more strongly than expected in June, although more recent survey data does suggest a renewed contraction looks ‘inevitable.’

 

Official data released last month by the Office for National Statistics (ONS) showed the economy grew by 0.5% in June. This figure was higher than any forecast submitted to a Reuters poll of economists, with the consensus prediction suggesting the economy would expand by just 0.2% across the month.

 

ONS said that June’s growth partly stemmed from the increased number of working days with the economy bouncing back from May’s extra Bank Holiday for the King’s Coronation. In addition, the warm weather provided a notable boost to trade in pubs and restaurants as well as activity in the construction sector.

 

June’s stronger than anticipated figure also resulted in the economy expanding across the second quarter as a whole. The increase of 0.2% between April and June again beat economists’ expectations with the consensus forecast from the Reuters poll pointing to a flat reading.

 

Data from a closely watched survey released towards the end of last month, however, suggests a third-quarter downturn looks increasingly likely. The preliminary headline reading from the S&P Global/CIPS UK Purchasing Managers’ Index fell from 50.8 in July to 47.9 in August. This represents the weakest recorded figure for two and a half years and took the index below the 50 threshold that denotes a contraction in private sector output.

 

Commenting on the survey’s findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The fight against inflation is carrying a heavy cost in terms of heightened recession risks. A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival.”

 

Interest rates rise again

  

Early last month, the Bank of England (BoE) announced a further hike in its benchmark interest rate and warned that rates were likely to remain high for some time.

 

Following its latest meeting which concluded on 2 August, the BoE’s nine-member Monetary Policy Committee (MPC) voted by a 6-3 majority to raise Bank Rate by 0.25 percentage points. This was the 14th consecutive increase sanctioned by the MPC and took rates to a 15-year high of 5.25%.

 

Two of the committee’s dissenting voices – Catherine Mann and Jonathan Haskel – voted for a more significant hike, preferring a 0.5 percentage point rise in order to “lean more actively against inflation persistence.” The other dissenting member – Swati Dhingra – again voted for no change, warning that the risks of overtightening “had continued to build.”

 

Although this difference in opinion shows that individual members of the committee are likely to hold differing views on the future path of interest rates, the minutes to the meeting did stress that further monetary tightening may be required. They concluded, ‘The MPC will ensure that Bank Rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term.’

 

On the day that he announced the decision, BoE Governor Andrew Bailey reiterated that message saying “we might need to raise interest rates again.” The Governor added that it was “far too soon” to speculate about the timing of any cuts and that rates would not fall until there was “solid evidence” that rapid price rises are slowing.

 

The next MPC meeting is due to conclude on 20 September with the rate announcement scheduled for the following day. A recent Reuters poll found economists now typically expect another quarter-point hike to be sanctioned at that meeting with rates then peaking at 5.5%.

  

Markets (Data compiled by TOMD)

 

At the end of August, major global stock markets closed the month in negative territory. European stock markets were mixed on the last trading day of the month, as key central bank policy meetings approached and investors processed regional inflation data.

 

In the UK, the FTSE 100 closed the month on 7,439.13, a loss of 3.38%. The mid cap focused FTSE 250 closed down 2.81% on 18,605.70, while the FTSE AIM closed August on 741.93, a loss during the month of 2.98%.

 

Across the pond, investors are awaiting the next batch of US employment data, which will provide a key indicator on the health of the economy and the impact of the Federal Reserve’s rate tightening measures. The Dow Jones Index closed the month down 2.36% on 34,721.91, while the tech-heavy NASDAQ closed the month down 2.17% on 14,034.97.

 

In Japan, the Nikkei 225 finished the month on 32,619.34, down 1.67%. On the continent, the Euro Stoxx 50 closed August on 4,297.11, a loss of 3.90%.

              

On the foreign exchanges, the euro closed the month at €1.16 against sterling. The US dollar closed at $1.26 against sterling and at $1.08 against the euro.

 

Tightening physical supplies are supporting oil prices. Brent crude closed August trading at around $86, a gain over the month of 1.04%. Gold closed the month trading at around $1,942 a troy ounce, a monthly loss of around 1.44%.

 

 

 

 

Index                                        Value (31/08/23)                           Movement since 31/07/23

 

FTSE 100                                   7,439.13                                                           -3.38%

FTSE 250                                   18,605.70                                                         -2.81%

FTSE AIM                                  741.93                                                               -2.98%

Euro Stoxx 50                            4,297.11                                                           -3.90%

NASDAQ Composite                14,034.97                                                         -2.17%

Dow Jones                                  34,721.91                                                         -2.36%

Nikkei 225                                  32,619.34                                                         -1.67%

 

 

 

Headline inflation rate declines

 

 

Official consumer price statistics have revealed a further fall in the UK headline rate of inflation, although the latest data also showed fresh signs of stickiness in terms of core inflation.

 

Figures released last month by ONS showed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – stood at 6.8% in July. While this was sharply lower than the previous month’s figure of 7.9%, the drop was exactly in line with forecasts.

 

ONS noted that falling gas and electricity prices had largely driven the decline as a change to the energy price cap came into force. Price rises for some staple food items including milk, butter, bread, eggs, cereal and fish also eased, although these dips were partially offset by a further rise in the cost of eating out, as well as a jump in flight, alcohol and tobacco prices.

 

Core CPI inflation, which excludes volatile elements such as energy, food, alcohol and tobacco, however, failed to fall. July’s figure of 6.9% was unchanged from the previous month and slightly higher than the consensus prediction from the Reuters poll.

 

 

 

Wage growth hits record high

 

 

Earnings statistics published last month showed that nominal wage growth rose at a record rate in the three months to June, although more recent survey data does suggest pay deals may have started to cool.

 

According to the latest ONS figures, average weekly earnings excluding bonuses rose at an annual rate of 7.8% in the April to June period. This represents the strongest growth rate since comparable records began in 2001 and was significantly higher than the 7.4% rise predicted in a poll of economists.

 

Commenting on the data, ONS Director of Economic Statistics Darren Morgan noted that wage growth is still not outstripping the pace of price rises. However, Mr Morgan did say that the latest figures show that real pay levels are now “recovering.”

 

The BoE has been closely monitoring wage growth for inflationary signs and the latest figures will undoubtedly have caused concern. Survey evidence, however, does point to a more recent slowdown – data from Adzuna, for example, shows average advertised salaries fell by 0.15% between June and July, while XpertHR figures show the median basic pay settlement in the three months to July dropped to 5.7% following six consecutive quarters at a record 6%.

 

 

 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for information only. We cannot assume legal liability for any errors or omissions it might contain. No part of this document may be reproduced in any manner without prior permission

 

All details are correct at the time of writing (1 September 2023).

 

 

 

 

Financial health is financial wealth.

If you want to be financially healthy, please book an initial meeting and let’s discover if we can help you
Call us on 01332913006

 

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