News in Review

“Conditions facing manufacturers have taken a turn for the better”

Sentiment in the manufacturing sector took a positive upturn in April, with output expectations hitting a six-month high, according to the latest Industrial Trends Survey, released by the Confederation of British Industry (CBI) last week.

As demand uncertainty recedes and financing concerns reduce, investment intentions for the year ahead have improved. Manufacturers anticipate stable investment in buildings, plant and machinery, a marked shift from the January outlook when investment intentions plummeted to a three-year low. The survey also highlights expectations that spending on product and process innovation will rise during the year.

Another key observation from the survey of 257 manufacturing firms was the uptick in business sentiment in the quarter to April, registering a balance of +9% from -3% at the start of the year. Meanwhile, export optimism for the remainder of the year saw a moderate increase, +6% versus -20% previously recorded. Previously these sentiment indicators had recorded declining optimism in every quarter but one during 2022 and 2023.

Deputy Chief Economist at the CBI, Anna Leach, commented, “Conditions facing manufacturers have taken a turn for the better, with sentiment improving and expectations for future output growth their strongest in six months. A softer labour market has eased concerns that skills and labour could constrain output and orders. Concerns about access to materials and components are also at their lowest since January 2020. These brighter conditions are supporting a more stable picture for investment over the year ahead.”

Focusing on future prospects and requirements for the industry, Ms Leach continued, “With the recovery still to fully pick up steam, we need to see everyone laser focused on delivering the big reforms that will help manufacturers grow and invest. Full capital expensing, with the potential to extend this to leased and rented assets, can be a game changer that unlocks the incredible power of our manufacturing sector and drives economic growth.”

UK borrowing higher than expected

Public finance data from the Office for National Statistics (ONS) showed government borrowing reached £120.7bn in the financial year ending in March. Although £7.6bn lower than the equivalent period last year, it was still £6.6bn more than the Office for Budget Responsibility (OBR) had predicted. These initial estimates may get revised in the coming months. During March, borrowing – the difference between public sector spending and income – totalled £11.9bn, £4.7bn lower than in March last year.

A spokesperson from the Treasury commented on the data, “Debt increased in recent years because we rightly protected millions of jobs during COVID and paid half of people’s energy bills after Putin’s invasion of Ukraine sent bills skyrocketing.” Adding that the government “must stick to the plan to get debt falling.”

IHT receipts keep rising

Inheritance Tax (IHT) receipts for the period April 2023 to March 2024 have been recorded as £7.5bn, according to the latest HMRC tax receipts data. At £0.4bn higher than the same period last year, the freezing of the IHT allowances and escalation in average UK house prices make this increase in total receipts unsurprising.

Consumer confidence

On Friday, the latest data from GfK showed that overall consumer confidence increased to -19 in April, from -21 the previous month. Despite the overall confidence score being a negative reading, all five underlying measures, including personal finance and general economic views, are much improved compared to April 2023 readings.

Client Strategy Director at GfK, Joe Staton, commented on the recent data set, “These improvements reflect the impact on household budgets of lower inflation and the anticipation of further tax cuts… Spring has arrived and maybe consumer confidence is, at last, slowly becoming brighter and heading in the right direction.”

However, he did caution that although improvement is evident, “There is a lot of ground to make up, and caution is needed in the face of continuing economic and fiscal challenges, and revised views on when the Bank of England might cut borrowing costs.”

FTSE 100 positive

London’s equity markets have been performing positively with the FTSE 100 racing ahead of the 8,100 level, supported by gains in the banking and mining sectors.

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 (1 May 2024)

More later life FTBs

The challenges young people face in getting on the property ladder are a regular feature in the media. A less-often discussed impact of the UK’s housing market, however, is the rising age of first-time buyers (FTBs). 

Average age rises 

The biggest increase in FTBs in the last five years has been among older homebuyers, a new report1 has revealed. Analysis carried out using product sales data from the Financial Conduct Authority (FCA) found that five-year annual average growth rates for 40 to 45-year-old FTBs is 8%. 

For those aged 46 to 50, the growth rate was 6.9%. Likewise, the 51 to 55 age group saw a rate of 6.6%. Overall, for over fifties, the five- year annual average growth rate was 7%. 

This is comfortably ahead of equivalent figures for younger groups. For example, 18 to 25-year-olds had a five-year annual average growth rate of minus 1.7%, while those aged 26 to 30 came in at minus 0.2%. 

Get in touch 

Whatever your age, if you’re looking to get a foot on the ladder, home ownership may not be as far off as you think. Getting the right advice for your needs can turn your dreams into a reality. 

1Tembo, 2024 

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

A plan to grow the global economy?

While the latest forecast released by the International Monetary Fund (IMF) does suggest global growth is likely to remain below its long-term historic average, the update did strike a relatively optimistic note with the organisation’s Chief Economist saying a global “soft landing” was in sight. 

Global growth upgraded 

In its first assessment of world economic prospects published this year, the IMF edged up its forecast for global economic growth with the improvement largely driven by inflation easing more quickly than previously anticipated. The international soothsayer said it now expects the world economy to 

grow by 3.1% over the course of 2024, up two-tenths of a percentage point from its previous forecast last autumn. 

Evenly balanced risks 

The IMF also noted that risks to growth prospects are now broadly balanced, with faster disinflation and looser than necessary fiscal policy during ‘the biggest global election year in history’ both cited as potential upside factors that could boost growth. On the downside, new commodity price spikes due to geopolitical tensions in the Middle East and continued attacks in the Red Sea could result in more persistent underlying inflation and thereby prolong tight monetary conditions, while deepening property sector woes in China could also lead to growth disappointments. 

Remarkable resilience 

Overall, however, the IMF suggested the likelihood of a ‘hard landing’ had receded. Indeed, the organisation’s Chief Economist, Pierre-Olivier Gourinchas, noted that the global economy “continues to display remarkable resilience, with inflation declining steadily and growth holding up.” He concluded, “We are very far from a global recession scenario.” 

Investment fundamentals 

An improving economic outlook should certainly provide opportunities for investors this year, although the key to successful investing will undoubtedly remain the adoption of a carefully considered strategy based on sound financial planning principles. 

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 cost of dying – relieving the pressure

Nearly half (48%) of adults aged 18 to 40 don’t have life insurance1. This puts many in a precarious position, as the unfortunate reality is that the cost of dying is high. 

Research has found that a premature death can cost surviving family members an average of £195,475 over the course of ten years2. These estimates are based on the hypothetical basis that someone leaves behind a partner and two children. The figure fluctuates depending on the location – London is the most expensive area (£261,754), while North East England is the cheapest (£130,160). The average cost in Wales was calculated to be £147,858 and it was £153,631 in Scotland. 

Higher funeral costs 

Of the adults under forty who do have life insurance, 27% said they took cover out to pay for a funeral. This is an important cost to consider as a recent report has found that the average cost of dying, which includes a funeral, professional fees and send off costs, is at a record high of £9,6583. 

Mitigate the pressure on loved ones  

Whatever your age, it is advisable to seriously consider taking out life insurance if you have dependents. Planning ahead now could significantly alleviate the stress on your loved ones, should anything happen. 

We can find the appropriate level of cover based on your specific circumstances and can advise you about writing the policy in trust so that the money will go directly to your chosen beneficiaries. This is also something that could be a useful tool for IHT planning, so get in touch. 

1,2Beagle Street, 2023 

3SunLife, 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. 

News in Review

“With UK inflation finally falling below the US, its unwanted outlier status is over”

New data from the Office for National Statistics (ONS) showed the Consumer Prices Index (CPI) rose by 3.2% in the 12 months to March 2024, down from 3.4% in February. The March CPI rate is the lowest in two and a half years and considerably down on the peak of 11.1% in October 2022.

Food inflation was the largest downward contributor to the monthly change in CPI, with prices rising by less than a year ago. Prices of food and non-alcoholic beverages increased by 4% over the 12 months to March (down from 5% in February) their weakest rise since November 2021, and the twelfth consecutive monthly easing. The largest upward contributor was an increase in fuel prices, with international oil prices climbing in March as growing tensions in the Middle East impact.

Senior Economist at the Resolution Foundation, Simon Pittaway commented on the new data release, “Many economies have struggled through an inflation-driven cost of living crisis over the past two years, but the UK has been an outlier – experiencing a prolonged period of double digit price rises. With UK inflation finally falling below the US, its unwanted outlier status is over. With a further significant drop due next month, inflation should soon return to target – and the pressure to cut interest rates will grow.”

Attending an International Monetary Fund (IMF) event in Washington last week, Bank of England Governor Andrew Bailey, said that different inflation dynamics in Europe and the US could lead to different paths for interest rates. He deduced that with UK inflation falling, the key question for the Monetary Policy Committee (MPC) remains how much more evidence is necessary before starting to cut interest rates.

Global recovery ‘steady but slow’

The bi-annual global growth outlook from the IMF released last week, entitled ‘Steady but slow: resilience amid divergence,’ has outlined a global economic growth prediction of 3.2% for both 2024 and 2025 (replicating the growth rate for 2023). This year’s forecast has been revised up by 0.1 percentage point from the January World Economic Outlook (WEO), and by 0.3 percentage points from the October 2023 WEO.

According to the outlook, a ‘slight acceleration’ is noted for advanced economies, with growth expected to pick up from 1.6% last year, to 1.7% this year and 1.8% in 2025. The expectation is that this uptick in growth will be offset ‘by a modest slowdown in emerging market and developing economies,’ tempering from 4.3% growth in 2023 to 4.2% this year and next.

By historical standards, the pace of expansion is low due to a series of factors including the ongoing effects caused by the Russian invasion of Ukraine, the pandemic, weak productivity growth, withdrawal of fiscal support, high borrowing costs and growing geoeconomic fragmentation.

Advanced economies are expected to return to their inflation targets earlier than developing economies and emerging markets. A steady decline in global inflation is predicted, reducing gradually to 4.5% next year, from 5.9% this year.

UK growth expectations

Looking at the UK, growth is expected to reach 0.5% this year, from 0.1% last year, before picking up to 1.5% next year. The 0.5% estimate for 2024 is 0.1% lower than the January prediction, and the second-slowest growth rate among G7 countries, after Germany and lower than the prediction of 0.8% by the Office for Budget Responsibility (OBR) outlined during the Spring Budget. As the lagged negative effects of high energy prices recede and ‘disinflation allows financial conditions to ease and real incomes to recover,’ the outlook into 2025 is more promising.

And further afield…

Growth in the US is expected to reach 2.7% this year, an upward revision of 0.6% from the previous prediction in January. GDP stateside is then expected to temper to 1.9% next year, with a combination of fiscal tightening and a softening job market weighing on demand.

Euro area growth is expected to bounce back from estimated GDP of 0.4% last year, to 0.8% this year and 1.5% in 2025. The recovery will likely be driven by improving household consumption, as the knock-on impact of elevated energy prices recedes and falling inflation supports real income growth.

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 (24 April 2024)

Residential Property Review – April 2024

Upcoming election has not discouraged potential movers 

A survey by Savills has found that the prospect of the UK General Election has not put off the majority of home movers.  

According to the report, 79% of respondents have not changed their intentions to move because of the UK election; in fact, 13% said that they were even more intent on moving. Just a small percentage (8%) were less sure about moving because of political uncertainty. Interestingly, the respondents most committed to their plans were those who plan to downsize or to relocate. Meanwhile, investors and those looking to secure a second home are more likely to hold off purchasing until the possible change in government. 

Head of Residential Research at Savills, Lucian Cook, commented, “Despite a General Election nearing, the short odds on a change in government mean that political change is already largely priced into the market, and for the most part, buyers will remain undeterred about pressing ahead with moving decisions.” 

A glimmer of hope for residential development? 

There are signs that residential development activity is getting back on track, albeit cautiously.  

A survey from the Home Builders Federation suggests that demand for new builds is increasing. In January of this year, the net reservation balance was positive for the first time since February 2022. Build cost inflation is also expected to further stabilise in 2024, having fallen from 15.5% to 3.1% in 2022-23 according to the Building Cost Information Service (BCIS). Additionally, the cost of labour and materials are predicted to reduce due to poor construction activity in the past year.  

While these signs of improvement are encouraging, housing development activity has still seen better days. Research from Knight Frank highlights that in 2023, housing starts in London were down 64% when compared with their peak point in 2015. 

A boost in homeowners putting their property on the market 

Spring got off to a promising start, as the Thursday before the Easter weekend was the busiest day of the year so far for new property listings. 

According to Rightmove, on 28 March there were 45% more new homes listed than the previous Thursday. Since August 2020, there have only been two days which have seen a higher number of listings recorded – Boxing Day 2022 and 2023.  

Tim Bannister, Rightmove’s property expert, advised that “while the uptick in activity we’ve seen over the past few months is a positive sign, sellers still need to heed the advice from their agent on pricing competitively to help secure a successful sale.” 

All details are correct at the time of writing (17 April 2024) 

Commercial Property Review – April 2024

Commercial property market update 

Latest research from Cluttons indicates that vacancy rates hit 4.1% at the end of 2023 – up from 3.8% in September.  

This is partly due to e-commerce activity remaining strong and the demand for buildings to meet net zero standards. Vacancies are expected to keep increasing as supply continues to be released into the market.  

Meanwhile, rental growth is easing across the UK; at the end of last year, the annual growth of asking rents in London was 3.5% – significantly less than the peak of 10% in Q2 of 2022. Experts hope that this slowdown will cause the commercial property market in the capital to pick up. Industrial yields are more stable, rising to above 4% in London and 6.9% in Manchester. Industrial equivalent yields have risen to 6.5% across the UK, which is likely to bring in investors. 

Retrofitting older buildings 

With industry standards rising, investors and occupiers in the UK logistics market are facing pressure to retrofit older properties to keep up with the high quality of new builds. If older buildings are not improved now, they risk being unusable in the coming years.  

The reports states that the ‘flight to quality of demand has, inevitably, started to weigh on the letting prospects of older, poorer-quality second-hand stock.’ 

With the government intent on decarbonising the economy, the focus on Energy Performance Certificates (EPC) and Minimum Energy Efficiency Standards (MEES) have risen to prominence across all sectors of the commercial property market. 

By 2027, the minimum EPC rating for existing commercial properties will be C, a building rating below this will be considered unsaleable and unlettable. While a few years later, in 2033, standards are likely to tighten (currently under consultation), applying to any property with an EPC rating under B. The report summarises, ‘While landlords will be wary of the tightening standards, retrofitting provides an excellent opportunity to meet these standards and future-proof warehouse assets.’ 

Major London skyscraper now 95% let  

The flagship London office scheme of AXA IM Alts – 22 Bishopsgate – is now 95% let.  

The state-of-the-art building close to Liverpool Street is owned by AXA IM Alts on behalf of multiple investors. Global software company, UiPath, and a London-based service provider have both signed 10-year leases, totalling 35,495 sq. ft. 

Completed in 2020, 22 Bishopsgate has not appeared to suffer from the shift to flexible working, as AXA IM Alts say they are heading towards full occupancy. The investment managers reported that ‘leasing momentum at the building has remained robust’ – in the past year, around 112,000 sq. ft. of space has been leased and there is strong interest in the 70,000 sq. ft. that remains vacant.   

Hilton enters luxury lifestyle market  

Hilton have made their first move into the luxury lifestyle market with the acquisition of a majority controlling interest in Sydell Group, owner of NoMad hotels. 

Hilton reportedly aims to develop up to 100 NoMad hotels internationally, with 10 sites already in advanced discussion stages with Sydell. Hilton will lead on the development of NoMad hotels while Sydell will remain responsible for branding, design and management.  

As part of the deal, Hilton will take control of the NoMad’s flagship hotel in London, situated in London’s Bow Street Magistrates Court building. 

Chris Silcock, President, Global Brands and Commercial Services for Hilton commented, “By pairing an already proven brand concept that’s ready for expansion with the power of Hilton’s commercial engine, we are accelerating our ability to drive growth in the luxury lifestyle segment.” 

This acquisition is part of Hilton’s plans to expand globally; earlier this year, the firm partnered with Small Luxury Hotels of the World (SLH), an association that inspects and verifies a curated collection of boutique accommodation. Hilton said they expect to increase their portfolio of luxury properties to 600-700 over the next few years.  

All details are correct at the time of writing (17 April 2024) 

News in Review

“The economy is turning a corner”

Last week, positive news came in the form of the latest UK gross domestic product (GDP) data from the Office for National Statistics (ONS) which showed the economy grew by 0.1% in February. This extends the economic recovery after growth in January was revised up to 0.3% from 0.2%.

Economic growth in February was led by an uptick in the UK’s production industry, which rose by 1.1% in the month, compared to a fall of 0.3% in January. Growth in the service sector, including hospitality and leisure activities, was also evident, alongside public transport and haulage, which also registered growth in the month. It’s likely growth would also have been supported by reductions in National Insurance, providing households with increased confidence in their spending and finances.

Despite a challenging month for retail and construction, impacted by the fourth wettest February on record, ONS Director of Economics Statistics, Liz McKeown said the latest data showed, “widespread growth across manufacturing, particularly in the car sector,” while “services also grew a little, with public transport and haulage and telecommunications having strong months.”

When asked about the economic data, Jeremy Hunt said the new figures were a “welcome sign that the economy is turning a corner… we can build on this progress if we stick to our plan.”

A spring in the step of the property market

The latest residential housing survey from the Royal Institute of Chartered Surveyors (RICS) shows buyer demand continued to rise in March with a net balance of +8% of respondents experiencing an increase in new buyer enquiries during the month. This is the most positive result on this indicator since February 2022. Respondents noted an uptick in new listings, increasing for the fourth consecutive month (+13%), while +13% predict increased sales volumes during the next three months, up from +6% in February. On the back of improved market conditions, the survey indicates sentiment is gradually improving. Respondents note a stabilisation in house prices, following falls last year.

Senior Economist at RICS, Tarrant Parsons, commented, “Near-term sales expectations point to an improving outlook, albeit the scope for an acceleration in activity will still be relatively limited given mortgage rates are set to remain much higher than in 2020/21.”

US inflation creeps higher

Rising costs of housing, clothing, fuel and dining out pushed the US rate of inflation higher in February, according to the latest data from the Labor Department. US consumer prices accelerated faster-than-expected in March, as the challenge to reduce inflation continues. Over the 12 months to March, prices rose 3.5%, up from 3.2% in February. This backward step is likely to impact the central bank’s next interest rate decision. If inflation remains higher than the Federal Reserve is comfortable with, a rate cut could be less likely.

Small business expectations

A recent small business survey of UK firms has highlighted an optimistic mood amongst business owners and freelancers this year, with 66% reporting that they expect to do better this year than last, whilst 32% plan to start a new business. The findings from Atom Content Marketing, reveals a significant number of owners expect their business to outperform the economy in 2024, with growth a key ambition for UK SMEs. Key concerns for the year ahead include funding, cashflow, political change and work-life balance.

Cash is King

Last week, Bank of England (BoE) Governor, Andrew Bailey, presented King Charles III with new banknotes featuring his image. The presentation at Buckingham Palace follows the tradition of the monarch receiving the first issues of new banknotes, issued with the serial number 00001.

The new banknotes will be issued on 5 June 2024 by the BoE. The portrait of the King will appear on existing designs of all four banknotes (£5, £10, £20 and £50). People will still be able to use all polymer banknotes featuring the portrait of Her late Majesty, Queen Elizabeth II as they will remain legal tender, co-circulating alongside King Charles III notes.

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 (17 April 2024)

Crafting your retirement strategy

Have you developed a retirement strategy yet? Whether you’re nearing retirement, or you still have many years of your working life ahead, careful planning is essential to secure financial stability and peace of mind when you stop working. 

Active planning is important 

According to a recent report1, individuals on average begin actively planning for retirement around the age of 36. At this age, 63% of respondents expressed confidence in their financial decision-making abilities, a notable increase compared to younger demographics where only 56% share the same level of confidence. 

With more than a decade of work experience under their belt by age 36, the ‘age of responsibility’ arrives for many people, with increasing awareness of the importance of financial planning, including actively thinking about their retirement. 

Whatever your age, a well-thought-out retirement strategy is a must! 

Decades to go? 

Younger individuals can afford to adopt a more aggressive investment approach with their pension pot, embracing riskier assets for potentially higher returns over time, if they are comfortable doing so. Although this strategy does involve exposure to short-term market fluctuations, the longer investment horizon allows ample time for recovery from any downturns (during which monthly pension contributions may be invested at the cheaper asset prices). 

If you’re closer to retirement 

For those on the cusp of retirement in the next few years, a prudent approach involves creating a smooth, non-volatile investment profile which minimises risk for the first five to ten years of retirement, with the remainder invested in more volatile funds which have the potential to grow over the longer term. This approach should help to shield your pension pot from the unpredictable nature of market volatility, as witnessed during events like the pandemic or financial crashes. By maintaining a stable portfolio for the initial years of retirement, you minimise the risk, thus safeguarding your financial wellbeing. 

How about the ‘inbetweeners’?  

For those falling between these two extremes, a balanced and risk-managed approach is advisable. The strategy here is to aim for a balanced mix of stable and more volatile investments, aligned to your risk tolerance and personal financial goals. Diversifying your portfolio across various asset classes helps mitigate risk while providing the potential for growth. 

The importance of rebalancing  

Regular portfolio rebalancing is vital for a sound retirement strategy. Market fluctuations and varying asset performances can cause your portfolio to deviate from its original allocation over time. Without intervention, this drift could lead to unintended asset concentration and increased risk exposure. 

1Standard 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. 

Adding value to your home this spring

If you’re looking to sell this year, you might be wondering how to add extra value to your home before listing. It’s not always obvious, though, what are the best ways to do this, so it is easy to become fearful of sinking money into a project that might not increase the sale price. 

Fortunately, research by an estate agent comparison website1 has revealed some of the best things it believes you can do to have a good chance of a price boost. Here are four ideas: 

Home / garden office 

The rise of hybrid working has made home offices increasingly desirable. The research suggests that converting a spare bedroom into a purpose-made office or creating office space in the garden can provide a boost of about £9,500. At around £12,000, this can be a costly improvement, but might add around 7.5% (roughly £21,500 for an average UK house) to your home’s market value. 

Deep clean 

A good old-fashioned clean is a very cheap way to add value! For less than £1,000, you can make your house sparkle, and with an estimated 2.8% added to the market value of your home, a deep clean can be a great investment. Of course, if you take on the cleaning yourself, you could save even more! 

Repaint and redecorate 

This isn’t guaranteed to make money since colour schemes and home décor are highly subjective. However, the research claims that a good redecoration, for a cost of about £3,000, can add 3.1%  to the property’s value, which means a profit of around £6,000 for an average priced home. Focus on the rooms most in need of a freshen up to minimise costs and maximise gains. 

EPC improvements 

Improving a lower-rated home’s Energy Performance Certificate (EPC) to at least a C rating will add about 3% to the market value. This won’t come cheap, though, with an estimated cost just over £6,000, leaving you with a possible profit of around £2,500. So, whether it is worthwhile will depend on your specific improvements and how far you can increase the rating. 

1GetAgent.co.uk, 2023 

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