News in Review

“If you look at recessions going back to the 1970s, this is the weakest by a long way”

Last week, Bank of England (BoE) Governor, Andrew Bailey, indicated that the UK recession may already be over, citing “distinct signs of an upturn.”

Comparing current conditions to historical downturns, Mr Bailey commented, “If you look at recessions going back to the 1970s, this is the weakest by a long way.”  He added his opinion that this recession is notably mild, with two successive quarters of negative growth recorded in the second half of 2023 – the standard by which the UK measures a recession – adding up cumulatively to a 0.5% reduction in the country’s annual gross domestic product (GDP).

Despite this, the Bank hinted that an interest rate cut isn’t likely in the immediate future as it is awaiting additional evidence, particularly in areas like wage growth and job vacancies, to confirm whether inflation has indeed shifted decisively.

The BoE Governor also highlighted the potential for inflation to benefit from a decrease in energy prices. And on Friday, Ofgem, the energy regulator, announced a reduction in the price cap on UK electricity and gas bills. From 1 April until 30 June 2024 the price for electricity and gas for a typical household will reduce to £1,690 per year. This is equal to a reduction of £238 a year, or around £20 a month, for a household using a typical amount of energy. The price cap set between 1 January to 31 March 2024 was £1,928. Ofgem’s price cap affects 29 million households in England, Wales and Scotland, while rules differ in Northern Ireland.

Mr Bailey cautioned that while this could temporarily bring overall inflation closer to the BoE’s 2% target in the spring, it might escalate over the year. “We’re observing positive trends emerging,” he remarked. “However, we require further substantiation of these trends… and that will guide my decision-making moving forward.”

Consumer confidence

On Friday, the latest UK consumer confidence data from GfK recorded a two-point decrease in February, to a reading of -21 (down from -19 in January), as households continued to be cautious with their spending.

GfK’s financial situation indicator year-on-year was down two points to -14 and remains unchanged with a value of 0 for the next 12 months, which is 18 points higher than this time last year.

The general economic situation sentiment over the last 12 months fell two points to -43 (22 points higher than last month), and for the next 12 months is down three points to -24, this is 19 points better than the level recorded in February 2023.

Client Strategy Director at GfK, Joe Staton, commented on the recent data set, “There’s a mixture of bad news and good news for February. The bad news is that the improvement in the Overall Index Score seen over recent months stalled slightly in February because of a fall across most measures. However, the good news is that optimism for our personal financial situation for the next 12 months has not slipped back.”

He continued, “Although registering again at zero, this is a significant improvement on the -18 score from February last year. This metric is key to understanding the financial mood of the nation because confident householders are more likely to spend, despite the cost-of-living crisis.”

King Charles banknotes to enter circulation in June

The BoE has announced that new banknotes featuring King Charles will enter circulation on 5 June. The King’s image will be on the front and also in the see-through security windows, with other design and security features remaining the same – the reverse side of existing polymer banknotes features Winston Churchill, Jane Austen, JMW Turner and Alan Turing. Shoppers can continue using Queen Elizabeth II notes without interruption and collectors can buy low-numbered notes from the new issues, via auction and a public ballot, with proceeds benefiting charity. The BoE will also allow limited exchanges of old notes for the new King Charles ones starting on 5 June.

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 February 2024)

Residential Property Review – February 2024

Positive start to the year for the housing market 

Increased demand from buyers and sellers is helping to get the housing market back on track this year.  

According to the Royal Institution of Chartered Surveyors (RICS), the data on new buyer enquiries is consistent with a gradual recovery which shows a 7% uptick in January, the most positive reading since February 2022. Sellers seem to be returning to the market too, with Rightmove reporting that valuation requests are up 23% when compared with January 2023. Consumer confidence is at a two year high according to GfK, which they attribute to falling inflation.  

Rightmove’s Property Expert, Tim Bannister, reflected on the rise in activity, “This is likely to be a combination of home-movers who have recently decided to make this the year to find a new home, and potential homebuyers who took a step back last year and paused their plans while the outlook for mortgage rates was more unclear.” 

2023 saw some house price stability 

House prices did not drop as much as initially predicted in 2023, as Zoopla look on the bright side of an otherwise difficult year for the housing market.  

According to data from the property portal, last year 56% of homes in the UK either increased in value or stayed at the same price. Moreover, 77% of residential properties stayed within the +/- 5% range. Zoopla reflected that house prices have generally been more stable since 2015, when mortgage lending criteria became stricter. 

Some homes rose in value by more than 5%. The value of one in ten homes increased by an average of £17,200, the majority of which are located in North West England. However, the South East did not fare so well, as 18% of homeowners saw their property’s value fall by 5%. Zoopla observed that many of these areas, such as Dover and Hastings, are commuter towns that saw an influx of interest during lockdowns. In these places, house prices may therefore be easing back to pre-pandemic levels.  

Hope for tenants in 2024? 

Supply has been struggling to meet tenant demand in recent years, but the pressure on the rental market may be cooling. 

Rightmove reported that at the end of 2023 there were an average of 11 prospective tenants enquiring about each property listing. Hopefully this year will prove easier, as data indicates that there are 7% more homes coming onto the rental market than last year. Rental costs may be easing too after hitting a record high. According to the HomeLet Rental Index, the average rent decreased by 0.9% between November and December 2023.  

Tim Bannister of Rightmove reflected, “We can’t keep seeing double digit rent rises every year as tenant affordability simply cannot keep up, and 2024 is the year we think there will be a much smaller increase in advertised rents of 5% outside of London, and 3% in the capital.” 

All details are correct at the time of writing (14/02/24) 

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. 

Commercial Property Review – February

2024 – a turning point? 

The recently released UK Commercial Market in Minutes from Savills has identified 2024 as a pivotal year for the commercial property investment market. Expectations are for an uptick in investment volumes versus 2023, after a couple of years of falls, with some strengthening in prime yields also likely. 

Positivity about the year ahead is grounded in expectations that Bank Rate will reduce as the year progresses and beyond, which should ignite purchase opportunities in the sector. Investors will look to buy UK commercial property ‘at the absolute nadir of this cycle to maximise their returns’ according to the report.  

It is also anticipated that optimism in the market is being heightened by sustainability in occupational markets. Last year average and prime rents increased in most logistics markets and prime rents rose in each of the UK’s major office markets. Looking ahead, subdued levels of development will place ‘downward pressure on vacancy rates in all sectors,’ which will result in the delivery of rental growth. 

Looking into 2025, the expectation is that the combination of positive exit yield optimism and a compelling story surrounding rental growth, will see an increasing number of investors returning to the market as confidence improves, and an uptick in demand would be the catalyst to yield recovery.  

Prime warehouse rents up 8% in 2023 

Colliers Industrial and Logistics Team’s latest analysis reveals that prime rents for large distribution warehouses (100,000+ sq. ft) in the UK rose to £11 per sq. ft, marking an 8% year-on-year increase.  

Mid-box and multi-let units also experienced a surge, reaching £14.50 per sq. ft, up 6.3% year-on-year. These rent hikes occurred despite a slowdown in take-up and an uptick in warehouse supply. Large warehouse take-up in 2023 totalled 24 million sq. ft, a 36% year-on-year decline, while supply increased to 38.5 million sq. ft, still below the pre-pandemic ten-year average of 45.2 million sq. ft. 

Confidence returns to Edinburgh and Glasgow office markets 

Although office take-up decreased in Q4 2023, looking ahead, Edinburgh and Glasgow are showing signs of recovery, marked by substantial space requirements from large corporations and a rising demand for flexible office setups, as reported by CBRE. Sustainability credentials are a key factor for businesses selecting new offices. 

The research reveals that 157,807 sq. ft of office space was occupied in Edinburgh during the final quarter, a 3% decline from the previous quarter, with a total of 618,148 sq. ft leased throughout 2023, driven by financial and professional sectors’ demand. Prime rents in Edinburgh have maintained stability at £43 per sq. ft.  

There are also signs of recovery in Glasgow, according to Sarah Hagen CBRE Director, “Once key lettings come forward in the early stages of 2024, we anticipate a surge in activity from those occupiers who once thought they had time on their hands, as supply continues to reduce and competition for best space increases.”  

All details are correct at the time of writing (14/02/24) 

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

“The Chancellor must use his Budget… to set out a clear pathway for firms and the economy to grow”

Data released last week from the Office for National Statistics (ONS) showed that UK gross domestic product (GDP) shrank by 0.3% in Q4 2023. Following a 0.1% contraction in Q3, the data shows that the UK slipped into a technical recession in the second half of 2023, measured by two consecutive quarters of GDP contraction. The fall in GDP in Q4 is steeper than expected, with economists widely predicting a milder 0.1% contraction.

The data showed a decline in all main sectors of the economy and a reduction in retail sales in the Christmas run-up, as consumers chose to cut back on spending, with increased living and borrowing costs weighing on personal finances. Widespread strikes held back productivity as public and private sector workers across various industries took action. Adverse weather conditions (heavy rainfall and strong winds) in the final three months of the year also negatively impacted economic output.

Liz McKeown, Director of Economic Statistics at ONS commented on the data, “Our initial estimate shows the UK economy contracted in the fourth quarter of 2023. While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat.” She continued, “All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery.”

The recessionary news came as a blow to the government. The Prime Minister defaulted on his pledge to kickstart economic growth, with the data showing GDP growth of just 0.1% during last year, the slowest annual growth recorded since 2009, outside the pandemic.

Responding to the ONS data, Director of Policy and Insight at the British Chambers of Commerce (BCC), Alex Veitch said, “The Chancellor must use his Budget in just under three weeks’ time to set out a clear pathway for firms and the economy to grow. Businesses are crying out for a long-term economic plan that reduces the cost pressures they are facing and unlocks the investment they so sorely need.”

Inflation holds steady

The latest Consumer Prices Index (CPI) inflation data was released last week and remained steady, rising by 4% in the 12 months to January 2024, matching the December rate. Despite Bank of England (BoE) expectations of a 4.1% increase, and still double its 2% target, there are predictions that CPI inflation will resume its downward trend next month and return to the 2% target in the following few months, according to the BoE.

The largest upward contributors to the monthly change in CPI were derived from housing and household services, primarily higher electricity and gas charges, while the largest downward contributors were from food and non-alcoholic beverages, and furniture and household goods.

When questioned about whether inflation remaining consistent in January was positive news, BoE Governor Andrew Bailey commented, “Yes, to be honest we slightly overshot last month and undershot this month so it pretty much leaves us where we were,” adding that he didn’t think the figure “broadly changes the picture” on interest rates.

The next ONS inflation release date is due on 20 March, just one day before the conclusion of the Monetary Policy Committee meeting, when the next Bank Rate announcement will be made.

Retail rebounds in January

UK retail sales rebounded last month, rising by 3.4% following a record fall of 3.3% in December. The highest monthly rise since April 2021, this uptick ‘returned volumes to November 2023 levels,’ according to ONS. Shoppers keen to enjoy new year offers flooded to supermarkets and department stores at the start of the year, in some positive news for the sector. Recovering from a record fall of 3.1% in December, food stores sales volumes increased by 3.4% in January, while volumes in department stores increased by 5.4%.

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 February 2024)

In the news

Gazundering in a buyer’s market 

Research1 has found that, in 2023, there was a 97% increase in people googling the term ‘gazundering’ – when a homebuyer reduces their offer on a property at the last minute, often just before exchange of contracts. About a third of sellers were subjected to gazundering last year2, indicating the property market currently favours the buyer. Gazundering is less common in Scotland because, while it does still occur, Law Society of Scotland governs the activities of solicitors acting on behalf of property buyers. 

Garden offices not going anywhere 

Do you have a garden office? If so, you are not alone! Gazundering is not the only term that has been googled regularly, as searches for ‘garden offices’ are 22% higher than before the pandemic3. With hybrid working seemingly here to stay, the last decade has seen a significant rise in the number of properties listed as having an office in the garden. 

Concerns over spike in longer mortgages 

The latest Bank of England Financial Policy Summary4 has highlighted that many homeowners are still feeling the effects of higher interest rates. As a result, some households have extended the length of their mortgage deal, with the report citing there has been ‘a notable increase in the proportion of borrowers taking out mortgages with 35 year or above terms.’ The Financial Policy Committee has explained that, while this does offer short term relief, ‘it could result in higher debt burdens in the future.’ 

1GetAgent.co.uk, 2023 

2House Buyer Bureau, 2023 

3Legal & General, 2023 

4Bank of England, 2023 

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

Equity release – on the rebound?

After a challenging few years, equity release is picking up steam again, with the market experiencing growth for the first time in a year, according to market statistics1. 

New customers (10%) and total lending (8%) both saw a quarterly rise in Q3 2023. During that period, 17,078 new and existing customers used equity release products. 

In total, £716m of wealth was withdrawn in the three months to September 2023, a rise from £663m in the previous quarter. The average initial drawdown was £63,238, while the average lump sum stood at £94,806. 

Generational support 

Lifetime mortgages are one way of benefiting from some of your property’s value without having to sell your house. The money generated could be used towards a specific project like a home renovation, for example. 

In recent years, a growing number of people have been using the money to support relatives. A study2 found that almost one in five parents and grandparents who helped their family members onto the property ladder used their own property wealth to do so (via equity release, downsizing or re-mortgaging). 

Back to 2017 levels 

Despite rising on the quarter, the number of active customers is still down 33% year-on-year. Moreover, new customers were down 45% on an annual basis, with total lending also down 58%, leaving the market stuck at 2017 levels. 

“These figures suggest the process of building back is slowly underway in the equity release market,” said David Burrowes, Chair of the Equity Release Council. He continued, “With customers starting to venture back, the market is at the start of a gradual but fragile road to recovery.” 

1Equity Release Council, 2023 

2L&G, 2023 

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. 

News in Review

“This is the fourth consecutive month that house prices have risen”

Last week the latest data from the Halifax House Price Index for January showed that the average house price increased by 1.3% in the month, the fourth consecutive monthly rise. The average home in the UK now costs £291,029.

The pace of annual growth is up 2.5%, representing the highest rate since January 2023. From a national growth perspective, Northern Ireland recorded the strongest growth, with annual house prices increasing by 5.3% and properties averaging £195,760. Wales and Scotland both experienced growth over the year of 4%, bringing average prices to £219,609 and £206,087 respectively. In England, from a regional perspective, over the last year the North West (+3.2%) and Yorkshire and Humber (+2.8%) have seen the biggest uptick in average prices. The top spot for the highest average house price across all regions is retained by London, despite prices in the capital reducing by 0.4% annually, standing at £529,528.

Director of Halifax Mortgages, Kim Kinnaird commented on the momentum in the market, “This is the fourth consecutive month that house prices have risen… The recent reduction of mortgage rates from lenders as competition picks up, alongside fading inflationary pressures and a still-resilient labour market has contributed to increased confidence among buyers and sellers. This has resulted in a positive start to 2024’s housing market.”

She continued, “Looking ahead, affordability challenges are likely to remain and further modest falls should not be ruled out, against a backdrop of broader uncertainty in the economic environment.”

The soaring cost of retirement

Last week the Pensions and Lifetime Savings Association (PLSA) released its latest Retirement Living Standards report which highlighted a shift in the cost of retirement living. The rising cost of living, combined with an expectation on retired people to provide financial assistance to their family has pushed up the cost of a ‘moderate’ retirement by £8,000 to £31,300 (for a single person), up from £23,300 in 2022/23.

Calculated by the Centre for Research in Social Policy at Loughborough University on behalf of the PLSA, the research focuses on three different retirement lifestyles: minimum, moderate and comfortable. The updated Standards revealed increased costs across all levels. The minimum level increased to £14,400 for a single person and to £22,400 for a couple. The moderate level increased to £31,300 for a single person and to £43,100 for a couple. And the cost of the comfortable level increased to £43,100 for a single person and to £59,000 for a two-person household. 

Director of Policy and Advocacy at PLSA, Nigel Peaple, commented, “The cost of living has put enormous pressure on household finances over the last year and, as the research shows, this is no different for retirees. It’s important for workers saving for retirement to remember the standards are not prescriptive targets, they are a tool to help you engage with the type of spending you think you will do in retirement and to help you plan for it.”

Some positive news in the construction industry

Construction companies in the UK experienced an improvement in business activity expectations in January, with optimism reaching its highest level for two years, according to the latest S&P Global UK Construction Purchasing Managers’ Index. The headline PMI registered 48.8 in January, up from 46.8 in December, the highest reading since August 2023. Although order books have been subdued, this data shows expectations are optimistic, with over half of the survey panel forecasting an uptick in business activity during the year ahead, while only 12% predicted a decline.

Wall Street and Nikkei highs

Last week, the S&P 500 index in the US broke through the 5,000 market for the very first time. The index was boosted by strong earnings and technology stocks which have performed well. Japan’s Nikkei hit fresh 34-year highs last week, breaching the 37,000 mark, following a report that the Bank of Japan was not planning aggressive monetary policy tightening.

Wage growth continues to outpace inflation

According to latest official figures from the Office for National Statistics (ONS) wage growth continues to slow but is still outpacing price rises. Pay, excluding bonuses, grew by 6.2% in the last three months of 2023 compared with the same period a year before. After taking price rises into account, pay went up by 1.8%.

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 (14 February 2024)

Time for a midlife MOT?

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

And we’re asking because nearly one in six people aged between 45 and 54 are now making significant financial sacrifices to ensure their pension pots are up to scratch for retirement1. At the same time, they are still juggling a multitude of other financial responsibilities, including childcare and mortgages, at a time when cost of living pressures persist. 

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

Here are some key aspects to think about: 

  1. Retirement planning – as you approach retirement, now is the time to take stock of your pension savings to ensure you’re on track for your goals 
  1. Protection – your health needs can change as you get older, so a review of your protection cover could be a good idea to ensure you and your family are properly protected 
  1. Debt management – a review can help you assess your current debts and work out how to best pay them off 
  1. Investments – are your investments working for you? Can your portfolio be rebalanced to better align with your risk profile and long-term financial objectives? 
  1. Estate planning – now is also an excellent time to review your long-term plans for passing your wealth onto the next generation and to make a Will and Lasting Power of Attorney (LPA). 

Here to help 

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

1Phoenix Group, 2023 

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

In the news 

Pension Tracing Service swamped 

People who think they could be missing out on thousands of pounds in pension savings have flocked to the phonelines to try and track down their lost money. Through a freedom of information request, it has come to light that The Pension Tracing Service received a total of 251,733 phone calls between July 2018 and August 2023. Figures suggest the average lost pension pot is worth £9,500. 

To save yourself time on the phone, you can access the government’s pension tracing tool at www. pensiontracingservice.com 

If you trace a lost pot, get in touch; we can check whether the underlying investments are suitable for your requirements. 

Milestone moments denied 

Many savers are now choosing to deny themselves milestone moments, such as major holidays, big weddings and home renovations, to keep putting money aside for future essentials. 

A survey1 asked respondents to classify themselves as spenders or savers. More than 80% of people who consider themselves to be ‘spenders’ still put money aside each month, being motivated to build a nest egg for the future. However, the amount savers feel they need to squirrel away varies markedly depending on age, with younger ages more likely to have abandoned plans. 

The importance of advice 

Research2 has found that the odds of selecting the top performing asset class every year for a decade is one in 282 million! In fact, investors are twice as likely to win the EuroMillions jackpot. That is why it’s so important to diversify your investment portfolio. 

1Gatehouse Bank, 2023  

2RBC Brewin Dolphin, 2023 

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

Let’s get you sleeping better in 2024

If you’re losing sleep over your finances, you’re not the only one. According to research1, nearly half (45%) of UK adults are lying awake at night because they’re worrying about money. 

The squeeze on people’s finances caused by the cost-of-living crisis is understandably a large part of this wave of insomnia, with those surveyed saying they’re struggling to pay for essentials. 

Enter professional financial advice  

Financial advice has been shown by study after study to lead to better financial outcomes for consumers. However, especially during difficult times such as these, it can also have a beneficial impact on our mental health and wellbeing. Advised consumers tend to exhibit lower levels of anxiety over their household finances and retirement income, and feel more in control of their finances and more prepared to cope with life’s shocks. 

This is backed up by a study2, which found that 42% of people would value extra financial advice or guidance during the cost-of-living crisis, while just under a third are anxious about money matters right now. 

Let’s get you sleeping better 

Life is too short to lose sleep over your finances. Get in touch with us and we’ll help you get your finances in order, to ensure your money is working for you. Let’s take back control and enjoy sweet dreams in 2024. 

1Aviva, 2023 

2Standard Life, 2023 

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