News in Review

“While the UK economy will perform better this year, it’s unlikely to be heading into the fast lane any time soon” 

The UK economy will now grow at a faster rate than previously thought in 2024, according to a report by the British Chambers of Commerce (BCC) released last week. 

The upgrade to 1.1% for 2024 came after official figures put second-quarter growth at 0.6%, a sign that the UK is continuing its recovery from a shallow recession in 2023. In its new release, the BCC also revised upwards its prediction for 2026 to 1.1% (previously 1%), while keeping its 2025 forecast unchanged at 1%. 

Despite upgrading the growth forecast, the report cautioned that the UK’s overall growth landscape remains relatively weak. Government spending has been the main driver of GDP growth this year, the BCC noted. Business investment is now predicted to increase by only 0.3% in 2024, a downwards revision from the previous forecast. In 2025, it will grow by 1.4%, according to the BCC, before reaching 2.0% in 2026. The services sector is projected to lead the way, with yearly growth above 1% across the forecasting period. 

Still, the revision from a previous projection of 0.8% for 2024 signals greater optimism for the UK economy. With lower inflation and interest rate cuts expected to take effect in 2025, the body expects a rosier picture for household consumption in the coming years.  

Commenting on the release, Vicky Pryce, Chair of the BCC Economic Advisory Council, said, “The BCC’s latest forecast shows that while the UK economy will perform better this year, it’s unlikely to be heading into the fast lane any time soon. As we head towards the Chancellor’s first Budget at the end of October, businesses will be wanting the government to focus on measures that boost investment, support growth and maintain competitiveness.” 

House prices at two-year high 

House prices in the UK reached a two-year high in August, the latest House Price Index from Halifax revealed. Prices were up 4.3% last month compared to a year earlier, putting the average cost of a UK home at £292,505 in August, not far below the record high of £293,507 recorded in June 2022. After a recent boost from the Bank of England’s first Bank Rate reduction for four years, confidence among buyers has grown considerably, the release noted.  

Halifax’s Head of Mortgages Amanda Bryden, commented, “While this is welcome news for existing homeowners, affordability remains a significant challenge for many potential buyers still adjusting to higher mortgage costs.”   

US jobs data 

Meanwhile in the US, a new report released by the Labor Department last Friday revealed that job growth was weaker than expected last month. In total, employers added 142,000 jobs in August, significantly below the forecasted 160,000. Analysts were quick to raise concerns that higher interest rates are putting a strain on the world’s largest economy. 

Further compounding the pessimism, the release revised downwards two previous estimates for job gains. More positively, the unemployment rate fell marginally from 4.3% in July to 4.2% in August. The Federal Reserve is still widely expected to cut interest rates this month; having raised its key lending rate to 5.3% in 2022, it is now in the process of unwinding this 20-year high. 

UK earnings 

Office for National Statistics (ONS) data, released on Tuesday, showed that annual growth in employees’ average regular earnings (excluding bonuses) was 5.1% in May to July 2024 and annual growth in total earnings (including bonuses) was 4.0%. Taking into account inflation, growth for regular pay was 2.2% in May to July 2024 and 1.1% for total pay. 

The Oasis effect 

The announcement that Oasis is reuniting for a tour in 2025 provoked excitement among music fans and those nostalgic for the 1990s. The biggest cheer, however, may have come from the UK economy.  

Analysis from the Centre for Economic Business Research (CEBR), a think tank, estimates that fans will spend hundreds of pounds on costs (excluding tickets) such as hotels, travel, merchandise and drinks. Initial estimates show that in total, the tour will (definitely maybe) boost the UK’s economy by £487m, with each fan set to spend an average of £406. 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

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. 

All details are correct at time of writing (11 September 2024) 

Guidance for first-time buyers

Getting a foot onto the property ladder has always presented challenges. Research suggests FTBs could currently be experiencing the most expensive conditions in 70 years1. 

Who is most affected? 

In the current property market, a successful first purchase often requires two high incomes plus financial support from family members. Therefore, those who are buying alone, have lower incomes or cannot access help from the Bank of Mum and Dad, are most likely to lose out. 

How old? 

Hopeful FTBs are forced to stay at home or in the private rented sector for longer. The average age of a first time buyer is now 36, having risen from 32 in 20042. 

Delaying proceedings 

Ongoing market uncertainty has caused hopeful homeowners to put their dreams on hold; over the last year, 49% of prospective FTBs have postponed their plans3. Just over half (53%) said high house prices were the main reason for delaying, while 41% cited rising mortgage costs. 

Making a compromise 

FTBs will likely need to consider different options if they want to get on the property ladder; 38% of those who have become homeowners in the last five years said they had to compromise. For example, 40% purchased a home that needed some renovation and 34% moved to a different location. 

Decline in homeowners 

Overall, home ownership has fallen in the last 20 years, and the number of residential owner-occupier mortgages has decreased by more than two million since the rate peaked in 20024. The UK has not seen such a low level of outstanding mortgages since the end of the 1980s. 

Advice is key 

We understand the difficulties that first-time buyers may face. You can make your home-owning dreams a reality with the right advice. 

1BSA, 2024, 2ONS, 2024 , 3Nationwide, 2024, 4BSA, 2024 

As a mortgage is secured against your home or property, it could be repossessed if you do not 

keep up mortgage repayments. Think carefully before securing other debts against your home. 

Equity released from your home will be secured against it. 

Don’t overlook a mid-life protection review 

Research1 has found that people in their 30s and 40s could be slipping through the net when it comes to protection cover. The data highlights that those in this age bracket are more likely to have inadequate protection cover for their mortgage, should the worst happen.  

Has your protection caught up?  

Many people experience significant life changes in their 30s and 40s, so it can be easy to forget to update your life insurance accordingly. With each ‘trigger’ event like getting married, becoming a parent or buying a house, comes a potential extra layer of cover that is needed to safeguard the future for you and your loved ones.  

Protection provides a lifeline  

So, it is vital to review your protection cover at regular intervals to make sure you have enough cover that is suitable for your unique circumstances.  

1HL, 2024  

Landlords taking steps to up their EPC game 

Research has found that some landlords are improving the energy performance of their properties even though it is no longer a potential legal requirement.   

Keen landlords   

Last year proposed regulations for all private rental properties to have a minimum EPC rating of C were shelved. However, 37% of portfolio landlords are still upgrading their properties to meet that standard1. In fact, nearly a third (32%) only own properties with a minimum rating of C.   

What’s the timescale?   

About 28% of landlords going ahead with work expect all their properties to have an EPC rating of C within one to two years. On the other hand, 17% think it could take them at least five years.   

Not all enthusiasts   

Some landlords were not so keen on making improvements, with 16% postponing work until legislation is potentially introduced. One in 10 said that the proposed regulations had no effect on their portfolio strategy.   

The advantages   

Regardless of whether it’s a legal requirement, there are many benefits to upgrading the EPC rating of a property.  By improving the energy efficiency, the running costs of the property are reduced and the property’s value is likely to increase.   

1Paragon Bank, 2024  

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments 

News in Review

“Shop prices fell into deflation for the first time in nearly three years” 

Fashion retailers trying to shift stock through summer sales helped shop prices to record their first annual fall for nearly three years, according to research from the British Retail Consortium (BRC). 

Prices in August were down 0.3% from a year ago, the lowest rate since October 2021. The drop in prices was driven by non-food goods, such as furniture and clothing, with retailers offering discounts as continued cost-of-living pressures and wet weather hit sales. 

Helen Dickinson OBE, Chief Executive of BRC, said, “Shop prices fell into deflation for the first time in nearly three years. This was driven by non-food deflation, with retailers discounting heavily to shift their summer stock, particularly for fashion and household goods. This discounting followed a difficult summer of trading caused by poor weather and the continued cost-of-living crunch impacting many families. Food inflation eased with fresh food prices, especially fruit, meat and fish, seeing the biggest monthly decrease since December 2020 as supplier input costs lessened.” 

Looking ahead, she added, “Retailers will continue to work hard to keep prices down and households will be happy to see that prices of some goods have fallen into deflation. The outlook for commodity prices remains uncertain due to the impact of climate change on harvests domestically and globally, as well as rising geopolitical tensions. As a result, we could see renewed inflationary pressures over the next year.” 

UK car production down  

Latest data from the Society of Motor Manufacturers and Traders (SMMT) shows that UK car production fell in July. A total of 65,478 cars rolled off production lines in the month which is 10,973 fewer cars than in the same month last year. SMMT said the decline in output was due predominantly to model changeovers and temporary supply chain challenges. Electrified (battery electric, plug-in hybrid and hybrid) vehicle manufacturing maintained a relatively stable 37.5% share of output, compared with 39.5% in July 2023. 

Mike Hawes, SMMT Chief Executive, commented, “Following significant growth last year, some readjustment in output was to be expected. Indeed, an ongoing degree of volatility is likely as the industry restructures to transition to zero emission vehicle production. As the billions already committed to new models start to deliver a return, volume growth will resume, providing we seize every opportunity to enhance our global competitiveness.”  

Rebound in mortgage approvals  

According to the latest Money and Credit statistics released by the Bank of England (BoE) last Friday, net mortgage approvals increased to 62,000 in July, the highest since September 2022 (65,100) and up from 60,600 in June. July’s approvals are considerably higher (+26.5%) than the 49,015 seen in the same month last year.  

Annual house price growth 

On Monday, Nationwide’s House Price Index revealed that UK house prices fell by 0.2% month-on-month in August, but the annual rate of house price growth continued to edge up. Average prices were up 2.4% year-on-year, up from 2.1% recorded in July and the fastest pace since December 2022 (2.8%). This puts the average property price (not seasonally adjusted) at £265,375, according to Nationwide. 

Robert Gardner, Nationwide’s Chief Economist, commented on the figures, “While house price growth and activity remain subdued by historic standards, they nevertheless present a picture of resilience in the context of the higher interest rate environment and where house prices remain high relative to average earnings (which makes raising a deposit more challenging). Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.” 

UK retail sales pick up 

Retail figures for August, released on Tuesday, showed that warmer weather lifted retail sales as shoppers spent on barbecues and picnics. The growth was driven by food, with the total amount spent in shops rising by 2.9% in the three months to the end of August, up from 2.6% reported the month before. 

Non-food sales fell by 1.7% over the same period, the same pace as July’s figure, according to the latest figures from BRC and analysts at KPMG. 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

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. 

All details are correct at time of writing (4 September 2024) 

Economic Review – August 2024 

BoE starts to cut rates  

In early August, the Bank of England (BoE) sanctioned the first reduction in interest rates since March 2020 and economists expect a second cut to be announced before the end of this year. 

The closely-run decision was announced on 1 August following the latest meeting of the Bank’s Monetary Policy Committee (MPC). At the meeting, the nine-member panel voted by a slim 5-4 majority to reduce rates by 0.25 percentage points, taking Bank Rate down to 5%. The four dissenting voices each voted to leave rates unchanged. 

Commenting after announcing the cut, BoE Governor Andrew Bailey described the decision as “an important moment in time” although he did stress people should not expect rates to fall sharply over the coming months. Mr Bailey noted that lower inflation had paved the way for the reduction but added that policymakers needed to be sure inflation remains low and be “careful” not to cut rates “too quickly or by too much.” 

The latest set of consumer price statistics, which were published by the Office for National Statistics (ONS) two weeks after the MPC announcement, did actually reveal a rise in inflation for the first time this year. The annual headline rate rose to 2.2% in July following two consecutive months at the BoE’s 2% target level – the figure was, however, lower than the 2.3% consensus forecast predicted in a Reuters poll of economists. 

While the BoE has stressed that further rate cuts will not be rushed, July’s lower than anticipated inflation figure does appear to have increased the chances of another reduction before the year-end. Although most economists in a recent Reuters survey did say they expect rates to remain on hold this month, a majority predicted the BoE will sanction one more cut this year, with November seen as the most likely month for that move.  

UK economy grows strongly 

Second quarter gross domestic product (GDP) figures released last month by ONS showed the UK economy has continued its strong recovery from last year’s brief recession, while more recent survey data points to relatively solid third quarter growth too. 

The latest GDP statistics showed UK economic output rose by 0.6% between April and June; this figure was in line with economists’ expectations and represents only a marginal dip from the robust rate recorded during the first three months of the year. ONS said the second-quarter expansion was driven by strong service sector growth, which offset small quarterly contractions in both the manufacturing and construction sectors. 

While economists have warned that the current pace of growth is unlikely to be maintained across the second half of 2024, the stronger-than-anticipated GDP figures so far this year have prompted economic soothsayers to upwardly revise their full-year forecasts. Early last month, for instance, the BoE upgraded its projections, which now predict the UK economy will expand by 1.25% across the whole of 2024, up from a previous forecast of 0.5%. 

Recently-released survey evidence, though, does point to a third-quarter slowdown, although the data does still suggest the economy continues to expand at a reasonable pace. The flash headline growth indicator from the S&P Global/CIPS UK Purchasing Managers’ Index (PMI), for instance, rose from 52.8 in July to 53.4 in August; both figures comfortably above the 50 threshold denoting growth in private sector output. 

Commenting on the survey, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson, noted that the manufacturing and service sectors both reported solid growth in August. He added, “Although GDP growth looks set to weaken in the third quarter compared to the impressive gains seen in the first half of the year, the PMI is indicative of the economy expanding at a reasonably solid quarterly rate of around 0.3%.”  

Markets (Data compiled by TOMD) 

As August drew to a close, investor attention shifted toward a potential interest rate cut in the US, following remarks from Federal Reserve Chairman Jerome Powell during his keynote speech at the annual Jackson Hole economic symposium.  

Powell said, “The time has come for policy to adjust… The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” Investors look ahead to the Fed’s next meeting on 17-18 September. 

On 30 August, the UK’s FTSE 100 ended flat, but registered its second consecutive monthly gain. Real estate shares were robust at month end as interest rate-cut hopes held firm. The index closed the month on 8,376.63, a small monthly gain of 0.10%, while the FTSE 250 closed the month 2.38% lower on 21,086.54. The FTSE AIM closed on 772.51, a loss of 1.84% in the month. The Euro Stoxx 50 closed August on 4,957.98, up 1.75%. In Japan, the Nikkei 225 closed the month on 38,647.75, a monthly loss of 1.16%.  

In the US, the Dow Jones registered some solid gains, closing the month up 1.76% on 41,563.08, ending on a high. Meanwhile the NASDAQ closed August up 0.65% on 17,713.62. 

On the foreign exchanges, the euro closed the month at €1.18 against sterling. The US dollar closed at $1.31 against sterling and at $1.10 against the euro.  

Gold closed August trading at $2,513.35 a troy ounce, a monthly gain of 3.59%. The dollar has strengthened against gold following recent all-time highs for the safe haven commodity. Brent crude closed the month trading at $76.83 a barrel, a loss over the month of 5.04%. Crude lost ground during August as concerns about demand and the prospect of increased supply from OPEC+ weighed on prices. 

Nominal wage growth continues to slow 

Official earnings statistics released last month showed nominal pay is now rising at its slowest pace in almost two years with survey evidence suggesting this slowdown looks set to continue. 

The latest ONS figures revealed that average weekly earnings excluding bonuses rose at an annual rate of 5.4% in the three months to the end of June. This was down from 5.8% in the previous three-month period and the lowest recorded figure since August 2022. After adjusting for CPI inflation, however, regular pay is still rising at an annual rate of 3.2%, the joint-largest rise in real earnings for around three years. 

Data from a Recruitment and Employment Confederation survey released early last month found that nominal pay growth increased even more slowly in July than it had in June. Additionally, the survey reported that the pace of pay increases for temporary staff is currently the weakest in over three years. 

Research from the Chartered Institute of Personnel and Development also suggests wage growth is likely to fall back further over the coming year. According to the survey, employers expect to raise pay levels by an average of 3% over the next 12 months, which would represent the smallest pay rises in two years. 

Euros and discounting boosts retail sales 

Although survey data released last month continues to highlight a tough retail environment, the latest official figures did reveal a rebound in sales volumes during July while hopes of rising real incomes triggering a boost to spending remain.  

Data recently published by ONS showed total retail sales volumes rose by 0.5% in July following June’s 0.9% decline. ONS said sales in department stores and sports equipment stores grew strongly in July with retailers saying summer discounting and sporting events, such as Euro 2024, provided a boost to sales.  

Encouragingly for the retail sector, the latest GfK consumer confidence index continues to report relatively strong levels of consumer sentiment. Indeed, August’s headline figure held steady at an almost three-year high, as households took an increasingly positive view of their personal finances and showed greater enthusiasm for major purchases. 

Recently-released survey data, though, did highlight the relatively difficult trading conditions retailers continue to face, with the CBI Distributive Trades Survey reporting sales as ‘poor’ for the time of year in August, with sales volumes expected to disappoint in September too. The CBI did note, however, that retailers should ‘gradually begin to see some tailwinds from consumers’ rising real incomes.’  

All details are correct at the time of writing (30 August 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. 

News in Review

“We can get through this together” 

In a speech from the Downing Street Rose Garden on Tuesday, the Prime Minister told an audience of voters he met along the campaign trail that, while his government may not get everything right, everything it does will be with them in mind. 

Keir Stamer said he intends to “get a grip” on the problems the country faces and to be “judged by actions, not words“, with his key priority being growth and wealth creation. He went on to make it clear that it “won’t be business as usual” when Parliament returns from recess on Monday, saying that “things will get worse before they get better” as he vows to root out “14 years of rot”. 

Condemning the recent riots which he said have exposed the UK’s “deeply unhealthy society,” the Prime Minister said the government has “inherited not just an economic black hole but a societal black hole.”  

Referring to the Autumn Budget on 30 October, he issued a warning saying, “It’s going to be painful. We have no other choice, given the situation that we’re in. Those with the broadest shoulders should bear the heavier burden.”  

Mr Starmer listed a number of key issues the government will be progressing over the remainder of the year including setting up Great British Energy, bringing rail services into public ownership, harnessing AI, levelling up workers’ rights and accelerating planning for building homes. 

He ended his speech saying the country will need to “accept short term pain for long term good” but he believes that “we can get through this together.” 

“Strong personal financial expectations” 

The latest Consumer Confidence Index from Gfk has shown British confidence held at an almost three-year high in August, supported by improving personal finances sentiment. 

The Index, Britain’s longest-running measure of economic morale among members of the public, was unchanged in the month at -13, matching July’s 34-month high.  

Sentiment was also boosted by positivity for major purchases such as furniture and electrical goods, which rose to its highest level since January 2022. The Major Purchase Index registered a three-point increase in the month to -13, eleven points higher than the August 2023 reading. 

Client Strategy Director at GfK, Joe Staton said the more positive outlook could potentially be attributed to “a mortgage-friendly interest rate cut at the beginning of August – and hopes of more to come.” 

The improving picture on the personal finance side was offset by a reduction in confidence in the economy. Sentiment about the economic outlook over the next year registered a four-point decrease to -15, the first time since February that economic expectations have weakened. Despite this, Mr. Staton pointed out, “There are strong personal financial expectations for the coming year… all the key numbers this month are significantly more encouraging than 12 and 24 months ago,” with sentiment about the economic outlook registering -30 last August. 

Energy price cap rise 

Last week, as part of the regular three-month review, the independent energy regulator Ofgem revealed an increase in the price cap affecting the units paid for electricity and gas in 28 million homes. In the three-month period from 1 October to 31 December the price will rise by 10%, adding around £12 per month (£149 per year) to an average direct debit bill. Households using the average amount of electricity and gas will have a total annual bill of £1,717. The regulator said the cap rise was a result of a combination of factors including rising prices on the international energy market because of geopolitical tension and extreme weather which have increased competition and demand for gas. 

Federal Reserve… 

On Friday, US Federal Reserve Chair Jerome Powell gave his much-anticipated keynote speech at the annual Jackson Hole economic symposium in Wyoming. Powell seemed confident that the Fed would achieve a soft landing through controlling inflation and averting a recession, ”while maintaining strong employment.” On rate cuts, he said, “The time has come for policy to adjust… The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” The Fed’s next meeting is 17-18 September. 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

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. 

All details are correct at time of writing (28 August 2024) 

Residential Property Review – August 2024

First cut in Bank Rate in over four years 

The Bank of England has reduced Bank Rate for the first time in more than four years.  

The rate is now 5%, having been held at 5.25% since August 2023, after 14 consecutive increases. The Monetary Policy Committee (MPC) marginally voted in favour of reducing Bank Rate, by 5 votes to 4. Many major mortgage lenders had already reduced their rates in anticipation of the cut and more are expected to follow suit. Despite this, the reduction is not expected to make a significant difference to mortgage affordability overall, however it is hoped to be the first of more cuts which should alleviate some of the financial pressures on homebuyers.  

Matt Smith, Rightmove’s mortgage expert, commented, “While those looking to take out a mortgage soon shouldn’t expect to see drastically lower mortgage rates, we would expect the downward trend we’ve started to see continue.” 

  

Renters’ Rights Bill – what’s in it 

The government has released notes on what to expect in the Renters’ Rights Bill, which is due to introduced in the autumn.   

As promised in Labour’s manifesto, the Bill will include the end of ‘no fault’ evictions but will have clear possession grounds for landlords needing to reclaim their properties. Renters will also have improved rights enabling them to challenge rent increases. Plus, the government plans to end ‘bidding wars’ on rental properties, although property experts Rightmove commented that this may be difficult as there are currently 15 prospective tenants for every rented property.  

Tenants will gain the right to request a pet, which the landlord must consider and cannot unreasonably refuse, however they can request appropriate insurance is purchased to cover any accidental damage.  A Decent Homes Standard is also expected to be applied to the Private Rented Sector to improve the quality of rental properties. 

  

The UK’s fastest selling homes 

Research by Zoopla has revealed the homes that sell the fastest in the UK.  

In England and Wales, almost half (49%) of homes find a buyer within 30 days of going on the market. This figure increases to 75% in Scotland where properties are valued and surveyed upfront, thus speeding up the homebuying process.  

In Q2 of this year, the fastest-selling property type on Zoopla was two-bed terraced houses, which took an average of 27 days to sell. It then usually takes another four months for the transaction to be completed. These properties appeal to a range of buyers, from first-time buyers to empty-nesters looking to downsize. Notably, there is also more competition for this kind of home due to limited supply, as they made up only 7% of new properties listed in the last three months.  

Interestingly, the slowest-selling properties are detached homes with at least four bedrooms, taking an average of 40 days before a sale is agreed. This is probably due to associated higher mortgage costs combined with a spike in supply of larger homes.   

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. 

All details are correct at the time of writing (19 August 2024) 

Commercial Property Market Review – August 2024

Latest from RICS 

The commercial property market remained relatively flat in Q2 of this year, according to the latest Royal Institution of Chartered Surveyors (RICS) survey.  

Tenant and investor demand were both largely stable as headline occupier demand stayed at a net balance of +4% – the same reading as the previous quarter. Investment enquiries also remained the same (-4%) indicating that investment demand has become stagnant.  

Meanwhile, the London office market continues to outperform the rest of the UK, with 68% of survey respondents expecting prime office rents to increase within the next year. There was not the same confidence in other regions, with 29% expecting rents to rise in both the North and South, and 25% predicting increases in the Midlands.  

RICS reported that a third (34%) of respondents believe that the market is at the bottom of the current cycle and 41% think it is in the early stages of recovery – a slightly more optimistic view than the previous survey.  

A mixed picture in Scotland 

Occupier demand for commercial property in Scotland continues to recover, supported by the most resilient backdrop for retail in eight years, according to RICS. 

A net balance of +4% of Scottish surveyors reported a rise in occupier demand across all sectors through Q2. Demand for office and retail space was flat, while a net balance of 13% of surveyors in Scotland noted a rise in demand for industrial space. The net balance for retail demand moved out of negative territory for the first time since 2016. 

Looking ahead, rents in both the retail and office sectors are expected to fall, while rents for industrial space are expected to rise through the third quarter.  

RICS Senior Economist Tarrant Parsons commented, “Respondents now feel the market is moving towards the early stages of an upturn following a challenging couple of years.” 

Rise in office space leased in the capital 

Leasing activity surged in London in Q2 of this year, according to Savills. 

Take-up in the capital rose quarterly by 21% to 2.3 million sq. ft. The insurance and financial services sectors were key drivers of this, accounting for 32% of office space leased so far this year. This is partly due to Citadel’s pre-let at 2 Finsbury Avenue EC2, which is scheduled to finish construction early in 2027.  

Although take-up in the City of London was 1% higher than its long-term average in Q2, leasing in the West End was 37% lower as the lack of larger deals continue to impact this market.  

There is noticeable demand for sustainable buildings – Victoria Bajela, Director of Commercial Research at Savills, observed, “Over 55% of take-up has been in BREEAM-rated Outstanding or Excellent buildings which continues to drive rental growth overall.”  Launched in 1990, the Building Research Establishment’s Environmental Assessment Method (BREEAM) is the world’s longest-established green building certification system.  

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. 

All details are correct at the time of writing (19 August 2024) 

News in Review

“The UK economy has now grown strongly for two quarters” 

The UK’s economy grew by 0.6% between April and June, according to the latest gross domestic product (GDP) figure released by the Office for National Statistics (ONS) on Thursday. 

After slipping into recession at the end of last year, analysts now say the UK economy has turned a corner and finds itself in a much stronger position for the final two quarters of 2024. The latest rise, which was in line with forecasts, comes after a 0.7% increase in the first three months of 2024. 

The services sector powered the UK economy to growth in the second quarter, according to the release, with legal services and scientific research leading the way. Other strong performers included IT, transport, architecture and engineering. 

In contrast, manufacturing and construction both saw output fall between April and June. Consumer-facing service output also dropped by 0.1% in Q2 2024, after cost-of-living pressures and poor weather contributed to soggy retail sales. 

Overall, however, the GDP figures present a positive picture. Significantly, the UK has now recorded the strongest growth in the G7 group of advanced economies over the past six months. Following the release, sterling edged higher too, with the pound climbing 0.2% against the US dollar.  

Commenting on the figures, Liz McKeown, Director of Economic Statistics at ONS, summarised, “The UK economy has now grown strongly for two quarters, following the weakness we saw in the second half of last year. Growth across the three months was led by the service sector, where scientific research, the IT industry and legal services all did well.” 

Inflation slightly up 

The UK’s inflation rate rose for the first time in 2024, according to another set of ONS data released last week. The Consumer Prices Index (CPI) increased by 2.2% in the year to July 2024, figures showed, with analysts labelling housing and household services as the major cause of upward pressure. Prices of gas and electricity fell by less than they did in 2023. 

The latest figures mean that prices are rising faster than in previous months and at a rate slightly above the Bank of England’s target of 2%. However, inflation remains well below 2022 and 2023 levels, they were quick to point out. 

Grant Fitzner, ONS Chief Economist commented, “Inflation ticked up a little in July as although domestic energy costs fell, they fell by less than a year ago. This was partially offset by hotel costs, which fell in July after strong growth in June.” 

Retail optimism 

A third set of ONS figures, released on Friday, painted a hopeful picture for the UK’s retail sector, with sales up by 0.5% month on month. This means that, in the three months to July, retail sales were up 1.1% compared with the previous three months, a significant improvement that analysts say bodes well for the rest of 2024. 

Non-food stores led the way, after recording a monthly rise of 1.4% in July, thanks in part to substantially improved department store and sports equipment sales, following high-profile sporting events such as Euro 2024. At the other end of the spectrum, automotive fuel sales fell by 1.9%; excluding fuel, overall sales in July rose by 0.7%. Furthermore, sales at clothing and household goods shops dropped by 0.6%. 

Still, with inflation down from its highs in 2022 and 2023, and further Bank Rate cuts expected later this year, analysts are predicting stronger consumer sentiment and spending for the months ahead. Alex Kerr, Economist at consultancy Capital Economics, is one such commentator who expects the trend to continue. “Lower inflation continues to support real incomes and bolsters consumer confidence,” he noted, which should pave the way for more sales rises. 

Uptick in credit card spending 

New data from UK Finance has shone a light on the increase in credit card usage and spending. With 382.1 million transactions in May, a 1.3% year-on-year uptick, the total spend of £21.4bn was a 1.4% increase versus May 2023. In the twelve months to May, outstanding balances on credit card accounts elevated by 8.5%, with just under half (48.9%) of those balances incurring interest. 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

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. 

All details are correct at time of writing (21 August 2024)