Economic Review October 2024

Economy set for short term Budget boost 

New economic projections produced by the Office for Budget Responsibility (OBR) suggest the Labour administration’s first Budget will provide only a ‘temporary boost’ to UK economic output.  

Chancellor Rachel Reeves revealed the independent fiscal watchdog’s latest forecast during her Autumn Budget delivered to the House of Commons on 30 October. The updated figures predict the economy will expand by 1.1% this year and 2.0% in 2025, slightly higher than the OBR’s March forecast, with growth then falling back across the remainder of this Parliament. Taken together, the OBR concludes that the Budget’s overall impact will leave ‘the level of output broadly unchanged at the forecast horizon.’ 

Prior to the Budget, release of the latest monthly gross domestic product (GDP) data revealed that the UK economy returned to growth after two consecutive months of stagnation. The Office for National Statistics (ONS) figures showed the economy expanded by 0.2% in August, with all major sectors posting some growth. Despite August’s pick up, ONS warned that the broader picture in recent months was one of ‘slowing growth’ when compared to the first half of the year.  

This loss of momentum was also highlighted in the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI), with its preliminary headline growth indicator falling to 51.7 in October from 52.6 the previous month. While remaining above the 50 threshold that denotes expansion in private sector output, this latest reading was the lowest since last November. 

Commenting on the survey, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “Business activity growth has slumped to its lowest for nearly a year in October as gloomy government rhetoric and uncertainty ahead of the Budget dampened business confidence and spending. The early PMI data are indicative of the economy growing at a meagre 0.1% quarterly rate in October.” 

UK inflation falls sharply 

Official consumer price statistics released last month revealed a larger than expected fall in the rate of inflation, potentially paving the way for further interest rate cuts in the coming months. 

Data published by ONS showed the annual headline rate of inflation dropped from 2.2% in August to 1.7% in September. ONS said the fall, which took the rate to its lowest level since April 2021, was primarily driven by lower airfares and petrol prices. 

The decline was greater than economists had anticipated, with the consensus forecast in a Reuters poll predicting a September reading of 1.9%. It also took the figure decisively below the Bank of England’s (BoE) 2% target, and further fuelled market expectations for more interest rate cuts this year. 

Last month, however, also saw two of the BoE’s nine-member rate-setting Monetary Policy Committee (MPC) advocate the continuation of a cautious approach to monetary easing. Megan Greene, for instance, suggested September’s sharp inflation fall had been driven by volatile components and again stated her preference for rate cuts to be gradual, while Catherine Mann said the cooling of price growth still had “a long way to go” for the Bank to hit its 2% target over the medium term. 

In early October though, BoE Governor Andrew Bailey (another MPC member) told the Guardian that, provided there was further welcome news on the inflation front, he felt the Bank could become “a bit more aggressive” in its rate-cutting approach. In a recent Reuters survey, all 72 of the economists polled said they believe a quarter-point rate reduction would be announced after this month’s MPC meeting on 7 November.  

Market expectations for the speed of monetary easing over the coming 12 months, however, eased back after the Budget, as the Chancellor’s big spending plans raised fears of a pick-up in inflationary pressures next year. 

Markets (Data compiled by TOMD) 

UK indices moved lower on the last day of October as markets continued to digest the Budget announcement, during which Chancellor Rachel Reeves unveiled £40bn of tax rises. On 31 October, the Institute for Fiscal Studies (IFS) warned about the likelihood of further tax rises following the Budget.  

The FTSE 100 index closed October on 8,110.10, a loss of 1.54%, while the mid cap focused FTSE 250 closed the month 3.16% lower on 20,388.96. The FTSE AIM closed on 737.10, a loss of 0.45% in the month. The Euro Stoxx 50 closed the month on 4,827.63, down 3.46%. At month end, the Bank of Japan retained interest rates at their ultra-low level as it monitors global economic developments and potential risks to domestic recovery. The Nikkei 225 closed October on 39,081.25, a monthly gain of 3.06%. 

With voters poised to take to polling stations stateside, robust economic data at month end confused the backdrop for imminent Federal Reserve rate cuts, as US stocks and government bonds fell. The Dow Jones closed the month down 1.34% on 41,763.46. The tech-orientated NASDAQ closed the month down 0.52% on 18,095.15. 

On the foreign exchanges, the euro closed the month at €1.18 against sterling. The US dollar closed at $1.28 against sterling and at $1.08 against the euro.  

Gold closed October trading at $2,734.15 a troy ounce, a monthly gain of 3.96%. Towards the end of the month, the precious metal traded higher as demand surged ahead of Diwali and the US election; uncertainty over the election outcome has made investors focus on the safe haven asset. Brent crude closed the month trading at $72.62 a barrel, a gain over the month of 1.35%. Oil prices stabilised at month end after rallying due to robust fuel demand in the US and reports that OPEC+ may delay an increase in output. 

Retail sales rise for third successive month 

Recently published ONS statistics showed that retail sales rose for the third month in a row in September, although more up-to-date survey data does point to a recent slowdown as consumers paused spending ahead of the Budget. 

The latest official retail sales figures revealed that total sales volumes rose by 0.3% in September, with ONS saying tech stores were the main driver of growth, reflecting a sales boost from the new iPhone launch. September’s growth defied economists’ expectations for a monthly 0.3% decline and, combined with July and August’s strong gains, resulted in sales volumes rising by 1.9% across the whole of the third quarter, the joint largest increase since mid-2021.   

More recent survey evidence, however, does suggest consumers became more cautious in the run-up to the Budget. The latest GfK Consumer Confidence index, for instance, found that sentiment fell to a seven-month low in October as concerns over possible tax hikes hit confidence.  

Data from last month’s CBI Distributive Trades Survey also points to a recent dip in consumer spending. The CBI noted that retail sales volumes ‘slipped back slightly in October,’ adding that some retailers had highlighted ‘increased consumer caution’ ahead of the Autumn Budget. 

More signs of a cooling jobs market 

The latest batch of labour market numbers revealed fresh evidence of a softening in the UK jobs market with both an easing in pay growth and a further fall in the overall level of vacancies. 

Statistics released by ONS last month showed that average weekly earnings excluding bonuses rose at an annual rate of 4.9% in the three months to the end of August. This figure was down from 5.1% in the previous three-month period and represents the slowest rate of pay growth for over two years. 

Adding to signs of a cooling jobs market, the release also revealed another decline in the level of vacancies. In total, ONS said there were 34,000 fewer job vacancies reported between July and September 2024 compared to the previous three-month period; this represents the 27th consecutive monthly fall in the number of vacancies. 

Last month also saw a number of recruitment firms report a more recent slowdown. Robert Walters, for instance, noted a pause in jobs market activity in the run-up to the Autumn Budget, while James Reed, CEO of recruitment consultancy Reed, said the UK labour market was experiencing “a slow-motion car crash” with firms lacking the confidence to hire new staff.   

Autumn Budget 2024

“Our mission to grow the economy”

Chancellor of the Exchequer, Rachel Reeves, delivered the Labour government’s first Budget on 30 October with a promise to “restore economic stability” and “invest, invest, invest” to promote growth. In her statement, she outlined a number of new tax and spending measures that she said would create “an economy that is growing, creating wealth and opportunity for all.” In total, the Budget will see taxes rise by £40bn.

Economic forecasts

The Chancellor stressed that every Budget she delivers “will be focused on our mission to grow the economy” and outlined seven pillars that will form the government’s growth policy priorities. Key among these is restoring economic stability and increasing investment, while other areas include boosting regional growth, improving skills across the workforce, creating an industrial strategy, driving innovation and transitioning to Net Zero.

Ms Reeves then unveiled the Office for Budget Responsibility’s (OBR’s) latest economic projections, which suggest the economy will expand slightly faster than previously expected both this year and next, before easing off from 2026 onwards. The new forecast predicts the economy will grow by 1.1% in 2024 and 2.0% next year, before falling back to 1.6% by the end of this Parliament. Overall, the OBR noted that, although the policies in the Budget will ‘temporarily boost’ the economy, the overall level of output will be ‘broadly unchanged’ over the five-year forecast period. Inflation is predicted to average 2.5% this year and 2.6% in 2025.

Cost-of-living measures

The Chancellor acknowledged the burden that the cost-of-living crisis has placed on working people, and committed to:

  • Increasing the National Living Wage (NLW) from £11.44 to £12.21 per hour from April 2025 – a 6.7% increase
  • Increasing the minimum for 18 to 20-year-olds from £8.60 to £10 per hour (over time, the intention is to create a single adult NLW rate)
  • Freezing fuel duty for one year and extending the temporary 5p cut to 22 March 2026
  • Increasing the weekly earnings limit for Carer’s Allowance to equate to 16 hours at the NLW rate
  • Providing £1bn for local authorities to support those in immediate hardship and crisis.

Personal taxation, savings and pensions

As pledged in the Labour manifesto, there are to be no changes to the basic, higher or additional rates of Income Tax, employee National Insurance contributions (NICs) or VAT.

As previously announced, the government has committed to maintain the State Pension Triple Lock for the duration of this Parliament, meaning that the basic and new State Pensions will increase by 4.1% in 2025-26, in line with earnings growth. This means £230.30 a week for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016) and £176.45 a week for the full, old basic State Pension (for those who reached State Pension age before April 2016).

The lower and higher main rates of Capital Gains Tax (CGT) will increase to 18% and 24% respectively for disposals made on or after 30 October 2024. The rate for Business Asset Disposal Relief and Investors’ Relief will increase to 14% from 6 April 2025 and then to 18% from 6 April 2026. The lifetime limit for Investors’ Relief will be reduced to £1m for all qualifying disposals made on or after 30 October 2024, matching the lifetime limit for Business Asset Disposal Relief.

Inheritance Tax (IHT) nil-rate bands will stay at current levels until 5 April 2030 (previously 2028). The nil-rate band remains at £325,000, residence nil-rate band at £175,000, and the residence nil-rate band taper starts at £2m. Unused pension funds and death benefits payable from a pension will be subject to IHT from 6 April 2027.

The government intends to reform Agricultural Property Relief and Business Property Relief from 6 April 2026. In addition to existing nil-rate bands and exemptions, the current 100% rates of relief will continue for the first £1m of combined agricultural and business property. Thereafter, the rate of relief will be 50%, including for quoted shares which are ‘not listed’ on the markets of recognised stock exchanges, such as AIM. From 6 April 2025, Agricultural Property Relief will be extended to land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities, or approved responsible bodies.

The concept of domicile status is to be removed from the tax system and replaced with a residence-based regime from 6 April 2025. This includes ending the use of offshore trusts to shelter assets from IHT and scrapping the planned 50% tax reduction for foreign income in the first year of the new regime. Individuals who opt in to the regime will not pay UK tax on foreign income and gains (FIG) for the first four years of tax residence.

In England, higher rates of Stamp Duty Land Tax (SDLT) which apply to purchases of second homes, buy-to-let residential properties and companies purchasing residential property, increase from 3% to 5% above the standard residential rates, effective 31 October 2024. The single rate of SDLT that is charged on the purchase of dwellings costing more than £500,000 by corporate bodies will also be increased by two percentage points, from 15% to 17%.

In addition:

  • Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030. The government will not proceed with the British ISA due to mixed responses to the consultation launched in March 2024
  • The Enterprise Investment Scheme and Venture Capital Trust schemes are extended to 2035
  • The Income Tax Personal Allowance and higher rate threshold remain at £12,570 and £50,270 respectively until April 2028. From April 2028, these personal tax thresholds will be uprated in line with inflation (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
  • Working age benefits will be uprated in full in 2025-26 by the September 2024 Consumer Prices Index (CPI) inflation rate of 1.7%
  • The starting rate for savings will be retained at £5,000 for 2025-26.

Business measures

In her speech, Ms Reeves said, “we are asking businesses to contribute more” to raise revenues required to fund public services. She added, “I do not take this decision lightly,” before announcing:

  • An increase in employers’ National Insurance Contributions (NICs) by 1.2 percentage points to 15% from April 2025
  • A reduction of the secondary threshold from £9,100 per year to £5,000 per year
  • An increase to the Employment Allowance from £5,000 to £10,500
  • The introduction of two permanently lower business rates for retail, leisure and hospitality businesses from 2026-27, funded by a higher multiplier for the most valuable properties
  • £1.9bn of support to small business and the high street in the form of a freeze on the small business multiplier and 40% rates relief for retail, hospitality and leisure properties (capped at £110,000)
  • £250m in funding for the British Business Bank’s small business loans programmes
  • The headline rate of Corporation Tax will be capped at 25%.

Health and education

To round off her inaugural Budget, Ms Reeves turned her attention to “two final areas in which investment is so badly needed to repair the fabric of our nation.”

As indicated in the Party’s election manifesto, the Chancellor confirmed plans to introduce VAT on private school fees (except for children below compulsory school age) from January 2025, and to remove private schools’ business rates relief from April 2025. 

Funding for the state school system is set to increase by £11.2bn from 2023-2024 levels – a 3.5% real terms increase. This includes:

  • Increasing funding for day-to-day school spending by £2.3bn, £1bn of which is earmarked for pupils with special educational needs and disabilities (SEND)
  • £1.8bn to continue the expansion of government-funded childcare
  • £30m to fund thousands more breakfast clubs in primary schools
  • Investing in new teachers for core subjects
  • £300m for further education.

Ms Reeves also announced a £6.7bn capital funding package for education in England in 2025-26, a real terms increase of 19% from 2024-25, including £1.4bn towards rebuilding over 500 schools in the greatest need.

Lastly, the Chancellor tackled her plans for the National Health Service, announcing:

  • A 10-year plan for the NHS, to be published in the spring
  • A £22.6bn increase in the day-to-day health budget to deliver on the government’s 18-week waiting time target
  • £3.1bn increase in the capital budget over this year and the next.

Other key points

  • Help to Save scheme – extended until April 2027
  • Alcohol duty – tax on non-draught alcoholic drinks to increase by the usually higher RPI measure of inflation, tax on draught drinks cut by 1.7%
  • Vaping products duty – new tax of £2.20 per 10ml of vaping liquid introduced from October 2026
  • Tobacco duty – to increase by 2% above RPI on all tobacco products and 10% above inflation for hand-rolling tobacco with immediate effect
  • Bus fares – £2 cap on single fares in England to rise to £3 from January 2025
  • Clean energy sector – £3.9bn of funding in 2025-26
  • Air Passenger Duty (APD) – increased for 2026-27, £1 more for domestic economy flights, £2 more for short-haul economy flights and £12 more for long-haul destinations. The higher rate applicable to private jets will rise by 50% in 2026-27
  • Devolved government funding – to receive an additional £6.6bn through the operation of the Barnett formula in 2025-26 (£3.4bn for the Scottish Government, £1.7bn for the Welsh Government and £1.5bn for the Northern Ireland Executive)
  • Expanding government-funded childcare support – an additional £1.8bn pledged for working parents in England, bringing total spending on childcare to over £8bn in 2025-26.

Closing comments

Rachel Reeves signed off her Budget saying, “I have made my choices, the responsible choices, to restore stability to our country, to protect working people… Fixing the foundations of our economy. Investing in our future. Delivering change. Rebuilding Britain.”

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 (30 October 2024)

News in Review

‘We observe good prospects of a soft landing of the global economy’ 

The International Monetary Fund’s (IMF’s) new World Economic Outlook entitled ‘Policy Pivot, Rising Threats,’ outlines global growth expectations of 3.2% in both 2024 and 2025. The international soothsayer predicts that rate cuts are ‘poised’ to continue, inflationary pressures will ease, growth will be modest, while geopolitical risks ‘remain threats to global stability and growth.’ 

At the IMF and World Bank annual meetings in Washington, IMF Director Kristalina Georgieva cautioned that a potential high debt, low growth route for the global economy will leave governments with diminished resources to improve opportunities and address challenges like climate change, adding, “These are anxious times with these problems in mind.”  

The IMF projects UK growth to reach 1.1% this year and 1.5% in 2025 as ‘falling inflation and interest rates stimulate domestic demand.’ 

Finance leaders and central bank governors from developed and emerging economies who had gathered at the event jointly issued a statement expressing optimism, ‘We observe good prospects of a soft landing of the global economy, although multiple challenges remain.’  

Praising ‘well-calibrated monetary policies’ that have helped to control inflation, the finance professionals spoke about a joint commitment to resist protectionism to support fair and open global trade. 

Rachel Reeves’ maiden Budget  

Speculation over the Labour government’s Budget has been rife for weeks. As news flow intensifies, likely targets for tinkering include pensions, Inheritance Tax (IHT) and Capital Gains Tax (CGT), areas which have received the most attention in the lead up to the Budget. Property could also be in the Chancellor’s sights, with possible changes to Council Tax bands, Stamp Duty and CGT. Businesses are concerned over possible National Insurance increases for employers. 

On Monday, the Prime Minister said the Budget will embrace the “harsh light of fiscal reality” but “better days are ahead.” Preparing the country for tax rises, Keir Starmer said he would “run towards” challenges and would not “continue the pretence that you can always have lower taxes and that your public services will run properly.” 

Rachel Reeves will present the latest economic forecast from the independent Office for Budget Responsibility (OBR) alongside her inaugural Budget on Wednesday. 

Consumers “holding their breath” 

Released last Friday, GfK’s consumer confidence survey edged down from -20 in September to -21 in October, in line with the median forecast in a Reuters poll of economists. The lowest reading since March, British consumer confidence is being impacted by concerns about possible tax hikes in the Budget. Neil Bellamy, Consumer Insights Director, NIQ GfK, commented on the new data set, “As the Budget statement looms, consumers are in a despondent mood despite a fall in the headline rate of inflation… This month’s Consumer Confidence Barometer paints a picture of people holding their breath to see what’s in store for them on October 30.” 

Manufacturing sentiment weakens 

The latest Confederation of British Industry (CBI) quarterly Industrial Trends survey has shown manufacturing sector sentiment fell during October at the fastest pace in two years. Over the quarter to October, output volumes fell, as did total new orders. Looking ahead, a decline in new orders is predicted, with over two thirds of survey respondents expecting order book strength is a key factor limiting output over the next quarter. Price and cost pressures have receded from July. According to CBI Lead Economist Ben Jones, “The recent downturn is expected to bottom out in the coming quarter, which is encouraging… amid a more uncertain outlook manufacturers have scaled back their plans to invest in buildings, capital equipment, innovation and training.” 

Commenting on the upcoming Budget, Mr Jones said, “While possible tax rises remain a concern, firms believe that clarity over future tax plans, measures to enhance productivity, and the country’s net zero trajectory can all help cement the path to long-term growth… Manufacturers will be looking to the Chancellor to deliver a confidence-boosting Budget that supports business and greases the wheels of investment.”  

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 (30 October 2024) 

Uptick in IHT receipts – what lies ahead?

Data1 has shown that Inheritance Tax (IHT) receipts have continued their ascent, with £2.8bn received in the April to July period this year. This figure is a substantial £0.2bn increase on the same period in the previous tax year (2023/24). 

Frozen thresholds continue to take their toll as IHT, once a tax reserved purely for the super wealthy, impacts more of us. Property values have generally risen over the last decade or so, driving record IHT levels. 

Whether the government chooses to focus on IHT in the upcoming Autumn Budget remains to be seen. Calls for simplification of the tax have been rife for years. With such high receipts the Chancellor may choose to make the tax work even harder for the Treasury. Whatever the future holds for IHT we will keep you informed of developments and work with you and your family to pass wealth down the generations as efficiently as possible, developing a strategy to help secure your beneficiaries’ financial future. 

1HMRC, 2024 

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. 

In the news

Money worries outweigh study concerns for almost half of students 

Have you got a child at university? If so, it’s likely, according to a new study1, that they’ll be more worried about the cost of living (a top-rated concern for 47% of students), than their academic studies (26%). Other main concerns of university students in the UK are listed as personal health and wellbeing (10%), next steps following university (9%) and career development (8%). 

Loud budgeting – good for your savings? 

The viral financial trend ‘loud budgeting’, where people are increasingly open about what they do and don’t want to spend their money on, is enabling people to set boundaries with friends and family. Research2 has shown that Gen Z (aged between 18 and 27) are most comfortable loud budgeting, with 61% happy to have these conversations with friends and 71% with family. Meanwhile 49% of those aged 35 to 54 and 50% of those aged 55+ feel comfortable talking about finances with friends, with 61% of 35 to 54-year-olds and 69% of over-55s at ease discussing financial constraints with family. 

1UNiDAYS, 2024 

2Standard Life, 2024 

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. 

News in Review

“Welcome news for millions of families” 

Data released by the Office for National Statistics (ONS) showed that the Consumer Prices Index (CPI) rate of inflation fell to its lowest rate in three and a half years in September. Easing to 1.7%, the rate dipped well below the Bank of England’s (BoE’s) 2% target. 

Analysts had widely predicted a fall from the 2.2% recorded the previous month, to 1.9%. This larger than anticipated fall now potentially paves the way for an interest rate reduction at the next Monetary Policy Committee (MPC) meeting in November. 

Prime contributors to the reduction in CPI came from the transport sector, ‘with larger negative contributions from air fares and motor fuels,’ according to ONS. Meanwhile, the main upward contributors were food and non-alcoholic beverages. Services inflation overall sank to its lowest level since May 2022 at 4.9% in the 12-month period to September 2024, down from 5.6% in August.  

Darren Jones, Chief Secretary to the Treasury commented that the reduction in the pace of price rises would be, “Welcome news for millions of families,” adding that the government is “focused on bringing back growth and restoring economic stability to deliver on the promise of change.” 

September’s inflation rate is typically used to set April’s increase in benefits such as Universal Credit, Jobseeker’s Allowance, Housing Benefit and Maternity Allowance. However, the government is yet to confirm this, it is likely to be referenced during the Budget on 30 October. Pensions are still set to increase by 4.1% due to the triple lock. 

More positive news… an upturn in retail sales 

ONS data released on Friday shows UK retail sales increased in September, with figures highlighting a 0.3% rise in volumes during the month, despite economists’ predictions of a 0.4% reduction. 

Combined with stronger gains in July and August, sales rose by 1.9% in Q3, the joint largest increase since mid-2021. Healthy gains were experienced by computer and telecommunication retailers, supported by Apple’s launch of the new AI focused iPhone 16 and updated Apple Watch and AirPods. This growth was offset by weakness in supermarket sales volumes which fell by 2.4% during the month, ‘the largest month-on-month fall for food stores this year,’ according to ONS. Retailers suggest unseasonably poor weather and cutting back on luxury food items, as prime detractors from growth. 

Hannah Finselbach, ONS Senior Statistician commented on the dataset, “Retail sales grew in September as tech stores reported a notable rise in sales… These were only partially offset by a poor month for supermarkets, where retailers said bad weather and households continuing to cut back on luxury food items hit sales.”  

ECB cuts rates (again) 

Last week the European Central Bank (ECB) cut official interest rates by twenty-five basis points in line with market expectations. The unanimous decision marked the first time in 13 years that the ECB lowered rates at consecutive meetings. The third cut this year, the Frankfurt-based institution lowered its benchmark borrowing rate to 3.25%. The Governing Council said the decision was ‘based on its updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission.’ The Council believe that the process of disinflation is ‘well on track.’  

£570m stolen by fraudsters  

Fraudsters stole over £570m in payment and fraud scams during the first half of 2024, according to UK Finance’s Half Year Fraud report. Criminals took £571.7m through both unauthorised and authorised fraud, a 1.5% decrease from the same period in 2023. Unauthorised fraud involves criminals stealing money using a victim’s bank details, while authorised fraud occurs when victims are tricked into making transactions themselves. Although banks prevented £710.9m in unauthorised fraud with advanced security systems, the figures show the continuing scale of the problem.  

Ben Donaldson, Managing Director of Economic Crime at UK Finance commented, “Criminals will keep adapting, which means we all need to remain focused on reducing fraud and thereby protect customers and society from the adverse effects of this awful crime.” 

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 (23 October 2024) 

Navigating a multi-retirement reality

Over the years, a number of notable trends, such as increased longevity and individuals taking on greater responsibility for their pension provision, have clearly altered the retirement landscape significantly. Now, new trends look set to further change the face of retirement, adding complexity to the retirement planning process and making early planning ever more essential. 

Multi-retirement households 

One of the new trends relates to families with more than one generation retired at the same time. A key impact of this trend will be the extra strain placed on families’ finances leaving many households needing to reassess retirement plans to navigate a multi-retirement reality. 

Age gap relationships 

Further complications also arise when there is an age gap in a relationship, as this means each partner will generally be looking at a different retirement timescale. Such a situation also heightens the need to plan at a family level, as it will typically mean other surrounding generations are at different life stages too, potentially adding greater complexity to family structures. 

Open and honest 

Discussing and planning for retirement has always clearly been vital but growth in multi-retirement families and age gap relationships makes this even more important. Open and honest conversations relating to retirement expectations need to take place between partners and with family, and key decisions over expected retirement timings and which family members will require financial support need to be discussed and agreed. 

The future can be bright 

While these trends will certainly change the face of retirement for many families, one thing that won’t change is our support. If you have any concerns about retirement, get in touch and we’ll help you create a plan to ensure a bright financial future for both you and your family. 

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. 

Residential Property Review – October 2024

Improving conditions in the residential market 

Activity in the residential property market is picking up as house prices continue to show modest growth, according to Savills.  

In August, mortgage approvals were only 3% below pre-pandemic levels. In September, sales agreed and new instructions were 8% and 9% above their respective 2017-2019 averages, highlighting that supply and demand are growing together.  

The boost in market activity coincides with a fall in mortgage rates – in August 2023, the average rate for a two-year fixed mortgage with a 75% loan to value (LTV) was 6.2%. In August 2024, this lowered to 4.8%.  

Although conditions are improving, house price growth is expected to be limited, due to the increased cost of living over recent years. Plus, general market growth will be dependent on Autumn Budget announcements and any potential reductions to Bank Rate and inflation.  

Rental market update 

The latest report from Zoopla has highlighted that rental inflation is slowing but tenant demand remains high.  

Over the last year, rents have risen by 5.4%; while this is a significant increase, it is the slowest pace of growth in three years. Rental inflation is not slowing at the same pace as household inflation and earnings because tenant demand continues to outweigh the supply of rental properties. In fact, there are currently 25% fewer rental homes available than in 2019. This is partly due to landlords deciding to sell – a trend which could continue depending on what tax changes the Labour government may have in store.  

September data shows that the average rent for new UK lets was £1,245 per month but the cost varies significantly from region to region. According to Rightmove, the cheapest UK city for renters is Carlisle, where the average rent is £791 – 41% below the national average. Following closely behind is Hull (£804), Sunderland (£807) and Stoke-on-Trent (£863).  

UK Finance’s recommendations for the Autumn Budget 

UK Finance has made a series of recommendations to the Labour Party ahead of the Autumn Budget.  

To motivate homeowners to upgrade the energy efficiency of their homes, the trade association has suggested that the government should introduce a Stamp Duty rebate scheme. The body also recommended that Stamp Duty bands are raised annually to correlate with increases to the average house price. 

The Stamp Duty threshold for first-time buyers is set to be reduced in March 2025, meaning the tax will be payable when purchasing a property worth £300,000 or more. But UK Finance has urged the Labour Party to keep the threshold at the current higher limit of £425,000. 

Chief Executive of UK Finance, David Postings, commented, “We have called on the government to not only introduce measures to bolster growth, but also a range of ideas to help support households and businesses up and down the country.” 

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 (16 October 2024) 

Commercial Property Market Review – October 2024

Commercial market update 

UK commercial real estate continues to perform well, according to BNP Paribas Real Estate. 

Investor sentiment has improved, with sterling continuing to strengthen, reaching its highest level against the dollar and the euro in over two years. This helps to attract overseas investors and boost UK weightings in global real estate allocations.   

Performance is recovering too and total returns were positive across all main sectors over the last three months – the first time this has been the case in over two years. It is important to note, however, that this recovery is expected to be gradual as investors and the market continue to find their feet.  

Etienne Prongué, CEO of BNP Paribas Real Estate commented, “UK real estate data continues to be reassuring. The trajectory for capital value is now positive across all property types and confirms the UK market is further along in its recovery than the rest of Europe. With the development pipeline remaining constrained and business surveys continuing to point to expansion, our forecast for prime office returns point to continuing UK outperformance over the next five years.” 

Modest recovery for retail  

The latest data from Colliers indicates that the retail market is showing signs of modest recovery.   

In capital markets, retail investment volumes increased to £200m in August. Although this is above the £150m reported in July, it is still significantly lower than the five-year monthly average for August, which stands at £660m. The largest single-asset transaction in August came from JP Morgan, who bought 291 Oxford Street for £70m at a 5.8% yield.  

In occupier markets, retails sales volumes increased by 2.5% annually in August but are still below pre-pandemic levels. Meanwhile, annual retail price inflation was at 3.5% in August, having lowered to 2.9% in June. Also, retails rents have risen for 22 consecutive months.  

Positive sentiment from Savills 

There seems to be a more positive sentiment in the UK commercial market, according to Savills.  

All sectors saw yields trending downwards or staying the same in August. Investment research firm, MSCI, reported that total returns were positive across the whole UK commercial market. The only sector displaying a yearly negative return was offices, however Savills expect this sector to pick up and return to positive territory in Q1 2025. Future supply is very limited, which will cause prime rents to keep increasing.  

The UK dominated European activity in H1 of this year, with a 29% share of investment volumes – 24% above the five-year average. There has been a notable increase in activity from French SCPI (Société Civile de Placement Immobilier) collective funds, who are investing in UK regional markets.   

Very limited supply of Glasgow office space

Savills has reported that demand for office space is significantly exceeding supply in Glasgow.  

In the first half of this year, take-up of office space across the city increased annually by 32%, reaching 177,514 sq. ft. There remains demand for up to 750,000 sq. ft of office space, but a limited supply of good quality offices exists, with only about 600,000 sq. ft of prime and Grade A office available. The take-up is therefore expected to stay below the long-term five-year average of 490,900 sq. ft.  

Rents are expected to go up to at least £40 per sq. ft due to the lack of new build and refurbishment projects in the pipeline. Commenting on the challenging conditions, the Head of Savills’ Glasgow office, David Cobban, said, “Ultimately, businesses will have to be prepared to pay more to get the type of space that fulfils their requirements.” 

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 (16 October 2024) 

News in Review

“It’s time to back Britain”  

Keir Starmer vowed on Monday to rip up investment-blocking red tape and make regulation “fit for the modern age” as he wooed global business leaders in the hope of attracting companies to invest billions of pounds in Britain.  

Addressing the International Investment Summit, the Prime Minister said “It’s time to upgrade the regulatory regime, make it fit for the modern age, harness every opportunity available to Britain. We will rip up the bureaucracy that blocks investment. We will march through the institutions and make sure that every regulator in this country – especially our economic and competition regulators – take growth as seriously as this room does … It’s time to back Britain.” 

The government said the Summit had secured a total of £63bn of investment pledges into the British economy. 

Employment Rights Bill  

Last Thursday, the government unveiled a major reform package to modernise UK employment law, aimed at enhancing workers’ rights. The proposed legislation will introduce 28 policies, including immediate rights for new employees, abolishing ‘fire and rehire’ practices, and overhauling trade union laws. However, many changes will not take effect until 2026, pending consultation on issues like zero-hours contracts, Statutory Sick Pay and trade union updates. The reforms extend probation periods for new hires to nine months. While the package has been welcomed by trade unions, some business groups are reported to be concerned about how the reforms would work in practice and there are fears some may be put off hiring new staff. A new Fair Work Agency will be established to enforce the rules, but its effectiveness is likely to depend on funding levels and resources. Full implementation of the package is expected to take years. 

Growth in UK economy   

Figures from the Office for National Statistics (ONS) released on Friday showed that the UK economy grew by 0.2% in August following two months of stagnation. The figure was in line with economists’ forecasts and was helped by broad-based expansions in services, manufacturing and construction. This growth came after zero growth in both June and July but marked a slowdown from the start of 2024. Breaking down the figures – services output grew by 0.1% in August, production was up by 0.5% and construction expanded by 0.4%. Ashley Webb, Economist at Capital Economics, said the expansion in August, after the economy had failed to grow in three of the four previous months, “Lends some support to our view that a mild slowdown in GDP growth in the second half of this year is more likely than another recession.” 

Sustained uplift in housing market 

The latest Royal Institution of Chartered Surveyors (RICS) housing market statistics have returned positive readings for demand, sales and new listings. In relation to demand, a headline net balance of +14% of respondents recorded an increase in new buyer enquiries. Meanwhile, for sales volumes, the aggregate net balance reading was +5%. Looking ahead, a net balance of +23% expected sales volumes to rise over the next three months. Together with the uplift in demand, there was an increase in new listings coming to the sales market, with a net balance of +22% of contributors reporting a rise in new instructions to sell. The average number of properties available per branch rose to 44.6 in September, which is the highest level recorded by the survey since December 2020. Additionally, the number of market appraisals undertaken over September was above levels seen 12 months ago. 

Slowing wage growth  

ONS data released on Tuesday showed that pay grew at its slowest rate (4.9%) for more than two years between June and August, leading to speculation that there may be a cut to Bank Rate when the Bank of England’s Monetary Policy Committee next meets in November. The figures also showed the unemployment rate fell to 4% (down from 4.1% in the previous three-month period) and the rate of people considered to be ‘economically inactive’ – which is defined as those aged between 16 to 64 years old who are not in work or looking for a job – dropped to 21.8%.   

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 (16 October 2024)