News in Review

“A critical turning point”

World leaders gathered in Dubai, United Arab Emirates (UAE), last Thursday for the 28th United Nations climate change conference (COP28). At the invitation of UAE President, Sheikh Mohamed bin Zayed Al Nahyan, King Charles addressed heads of state, leaders of governments and delegates at the opening ceremony.

The King called on those attending the conference to make COP28 “a critical turning point” and gave this warning, “We are carrying out a vast, frightening experiment of changing every ecological condition, all at once, at a pace that far outstrips nature’s ability to cope … our choice is now a starker, and darker, one: how dangerous are we actually prepared to make our world?”

President of the European Council, Charles Michel, called for increased and rapid global action to keep the global temperature rise within 1.5 degrees saying, “The Earth belongs to our children. This is not an advertising slogan; it is an existential reality. The decade ahead is crucial, and we are fully mobilised to work with each of you to protect humanity.”

On Monday, the gap in climate finance took centre stage, with UAE pledging $270bn in green finance by 2030 through its banks. Several development banks made fresh moves to scale up their funding efforts, including agreeing to pause debt repayments when disaster strikes. COP28 President Ahmed Al-Jaber said, “The scale of the climate crisis demands urgent and game-changing solutions from every industry. Finance plays a critical role in turning our ambitions into actions.”

Automotive industry sees remarkable recovery

Following a few difficult years for the automotive industry, things appear to be looking brighter. According to the Society of Motor Manufacturers and Traders (SMMT), UK car manufacturing output was up by 31.6% in October, with factories producing over 91,000 units. Production for the home and overseas markets were revealed to have risen by 23.9% and 33.4% respectively, whilst exports were shown to be responsible for driving a 16.7% uptick in year-to-date volumes. Investment is currently flooding into the industry, with around £4bn committed by the government and industry combined in November alone.

Mike Hawes, SMMT Chief Executive, said, “These figures, coming on the back of a series of significant investment announcements, signpost a bright 2024 for the UK automotive sector. Government and industry are committing billions to transform the industry for a decarbonised future… automotive remains one of the country’s most critical industries, delivering jobs, productivity and economic growth across the country.”

House price recovery continues into November

Despite predictions of a housing market crash, house prices continued to recover in November with 0.2% growth month-on-month, according to the latest Nationwide House Price Index.

While year-on-year growth remained sluggish in November (at -2.0%), this is up over a percentage point from -3.3% in October and represents the strongest annual growth in house prices since February 2023.

There have also been significant changes in expectations for the future of Bank Rate, with many investors now believing that rates have peaked at 5.25% and could fall to around 3.5% in the coming years. Experts believe that this will relieve some of the pressure on affordability that has dampened housing market activity over the past year.

Robert Gardner, Nationwide’s Chief Economist, commented, “While mortgage rates are unlikely to return to the lows prevailing in the aftermath of the pandemic, modestly lower borrowing costs, together with solid rates of income growth and weak/negative house price growth, should help underpin a modest rise in activity in the quarters ahead.”

Second home market

New research from GetAgent, analysing data from the Office for National Statistics (ONS), has revealed that there are 141,245 second homes in England and Wales, the estimated total value of which is £43.5bn. Looking at the analysis, flats are the most common property type for a second home, with 42% of the market allocated to this type. Followed by detached homes (23%), which although accounting for just under a quarter of the market, have the largest share of the market by value (£15.9bn). Terraced properties follow closely behind, representing 21% of the overall market, with semi-detached homes the least prevalent (13% of market stock).

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 (6 December 2023)

Tax toll on prudent savers 

Taxes on savings and dividends are set to top £24bn this fiscal year in what is being seen by some as a fresh attack on savers who have shown prudence and thrift. 

Savers hit… 

Higher interest rates mean that more savers are being drawn into paying tax by crossing the Income Tax savings threshold. Interest earned on savings is only tax-free up to a maximum of £1,000 a year for basic rate taxpayers and £500 for those paying the higher rate. HMRC is expected to raise £6.6bn in 2023-24, which is more than five times higher than two years ago. 

.. and those getting dividends  

Individuals who own significant dividend-paying stocks or rely on dividends as a primary source of income have also been hit, with the annual Dividend Allowance having been halved from £2,000 to £1,000 in April 2023, and halving again in April 2024, to stand at just £500. The take on Dividend Tax is set to increase by almost £2bn to £17.6bn this tax year, according to new figures from HM Revenue and Customs (HMRC). 

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 talk it through

A pandemic closely followed by a cost-of-living crisis has undoubtedly created a challenging financial backdrop for us all and inevitably heightened money-related stress and anxieties. At times like these, it’s more important than ever to open up and talk any concerns through with loved ones or a professional adviser in order to protect both financial and mental wellbeing. 

An intricate link 

The sheer volume of negative news stories relating to the economy and household finances makes it almost inevitable that this doom and gloom plays on people’s minds. Research highlights a clear, if intricate, link between financial and mental health, with a poll conducted by the Money and Mental Health Policy Institute revealing that 86% of people experiencing mental health problems believe their financial situation worsened their mental wellbeing. 

Long-term outlook 

While it is obviously normal to worry about finances, things are not usually as bad as people fear. This is particularly true for those who have developed a well-structured long-term financial plan. In this case, talking through any potential problems with us typically provides much-needed reassurance and can ease any concerns you may have. 

Emotional value of advice 

Indeed, while financial advice clearly delivers benefits on many fronts, emotional support is one aspect particularly valued during challenging economic times. We are able to provide clients with a more holistic market insight that considers positive as well as negative factors and provides a sharp focus on potential opportunities. This can bring considerable comfort and peace of mind to clients, with the reassurance of knowing long-term financial plans remain firmly on track. 

We’re here for you 

So, if you’re feeling stressed or anxious about any aspect of your finances please get in touch. 

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.  

Economic Review – November 2023

OBR cuts economic growth forecast

Revised forecasts from the Office for Budget Responsibility (OBR) suggest the UK economy is set to grow more slowly over the next two years than previously predicted.

Chancellor Jeremy Hunt unveiled the independent fiscal watchdog’s latest projections during his Autumn Statement delivered on 22 November. The updated forecast predicts the economy will expand by 0.6% this year and then by 0.7% in 2024 and 1.4% in 2025. While the 2023 figure is a significant improvement on the OBR’s previous prediction of a small contraction, the other two figures both represent large downgrades.

Forecasts published earlier in the month by the Bank of England (BoE) also point to a sluggish growth outlook. While not predicting a recession, the Bank expects almost no growth at all from now until 2025, with Bank Governor Andrew Bailey expressing concerns over the economy’s potential to grow. Third quarter gross domestic product (GDP) figures released by the Office for National Statistics (ONS) also added to the subdued picture, with the economy flatlining between July and September.

Data from the latest S&P Global/CIPS UK Purchasing Managers’ Index, however, was more encouraging, with the preliminary composite headline figure unexpectedly rising to 50.1 in November. This was significantly above October’s 48.7 reading and moved the index back above the 50 threshold that denotes an expansion in private sector output.

S&P Global Market Intelligence’s Economics Director Tim Moore said, “The UK economy found its feet again in November as the service sector arrested a three-month sequence of decline and manufacturers began to report less severe cutbacks to production schedules. Relief at the pause in interest rate hikes and a clear slowdown in headline measures of inflation are helping to support business activity, although the latest survey data merely suggests broadly flat UK GDP in the final quarter of 2023.”

Inflation rate falls sharply

The latest consumer price statistics revealed a significant drop in the UK headline rate of inflation, although the BoE Governor has warned that getting the rate to continue falling back to target will be “hard work.”

Data published last month by the Office for National Statistics (ONS) showed the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – stood at 4.6% in October. This represents a significant fall from September’s 6.7% figure and was below analysts’ expectations which pointed to a rate of 4.8%.

ONS said the decline, which was the largest monthly drop since April 1992, was mainly driven by a steep reduction in household energy bills compared to last year’s levels. There was also some evidence of a wider softening of price pressures, with some sectors, such as overnight hotel accommodation, witnessing a notable easing in annual inflation rates.

Despite October’s large fall, the CPI rate does remain significantly above the Bank’s 2% inflation target and, in recent weeks, BoE policymakers have warned that the ‘last mile’ of getting it all the way back down to target is likely to be tough. For instance, commenting on this year’s inflation decline during an interview with news website Chronicle Live, the BoE Governor said, “The second half, from there to two, is hard work.” 

Early last month, the BoE’s Monetary Policy Committee (MPC) voted to keep interest rates on hold for a second consecutive meeting and stressed it will not be cutting rates any time soon. The Bank also warned inflation might not fall as quickly as some are hoping, with its latest forecasts predicting the CPI rate will only return to target by the end of 2025. The next MPC interest rate announcement is scheduled for 14 December.

Markets (Data compiled by TOMD)

Global indices largely closed in positive territory as November drew to a close, supported by easing inflation data in the EU and US at month end. Expectations of a peak in US interest rates buoyed equities globally.

In the UK, the FTSE 100 closed the month on 7,453.75, a gain of 1.80%. Meanwhile the mid-cap focused FTSE 250 closed up 6.73% on 18,233.74, while the FTSE AIM closed the month on 713.78, a gain of 4.99%.

A robust corporate earnings season boosted Japanese equities in the month, with the Nikkei 225 registering a monthly gain of 8.52% to close the month on 33,486.89. On the continent, the Euro Stoxx 50 ended November on 4,382.47, a gain of 7.91%.

During Q3, the US economy grew faster than expected according to new data at month end, further demonstrating its resilience. The Dow Jones Index closed November up 8.77% on 35,950.89, while the NASDAQ closed the month up 10.70% on 14,226.22.

On the foreign exchanges, the euro closed the month at €1.15 against sterling. The US dollar closed at $1.26 against sterling and at $1.08 against the euro.

Brent Crude closed the month trading at around $81.50, a loss of over 4%, as concerns over global demand weigh and the latest OPEC+ meeting failed to result in a commitment to reduce production. Gold closed the month trading at around $2,035 a troy ounce, a monthly gain of 1.93%, supported by expectations that the Federal Reserve could cut interest rates, enhancing the appeal of the non-yielding precious metal.

Pay growth outstripping inflation

Earnings statistics released last month showed real wages rising at the fastest rate for two years, although there are also signs that nominal pay growth may have started to ease.

According to the latest ONS figures, average weekly earnings excluding bonuses rose at an annual rate of 7.7% in the July to September period. After adjusting for inflation, regular pay increased by 1.3% on the year; this represents the largest rise in real earnings since the three months to September 2021.

The data release did, however, suggest that nominal pay growth may now have peaked, with the latest figure slightly lower than the rate recorded during the previous three-month period. This slowdown has been particularly noticeable in certain industry sectors, including construction and manufacturing, as the jobs market begins to cool.

Last month also saw the Chancellor confirm that the National Living Wage will rise to £11.44 an hour from April 2024. The move, which equates to a 9.8% increase from its current level, will boost the earnings of around two million workers aged 23 and over. In addition, the Chancellor announced that, for the first time, the National Living Wage will also apply to those aged 21 and over from next April.

Retail sales fall again

Data recently released by ONS showed a further monthly decline in retail sales volumes and more recent survey evidence suggests little sign of an imminent revival in retail activity.

Although economists had expected a small rise, official statistics revealed that the volume of products sold in the UK actually fell by 0.3% in October. This follows a downwardly revised decline of 1.1% in September to leave total retail sales at their lowest level since early 2021. ONS noted that retailers felt ‘cost of living, reduced footfall and the wet weather in the second half of the month’ all contributed to October’s decline.

The latest CBI Distributive Trades Survey did report some improvement in sentiment across the retail sector during November. However, the headline measure of sales volumes fell year-on-year for the seventh consecutive month while a majority of retailers also said they expect sales volumes to be below seasonal norms in December.

Commenting on the findings, CBI Principal Economist Martin Sartorius said, “Retail sales have languished in negative territory for much of 2023, reflecting the impact of strained household finances on the sector’s fortunes. Though sentiment has picked up slightly, firms do not feel that a revival in activity is imminent.”

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

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

Autumn Statement 2023

“Our plan for the British economy is working”

On 22 November, Chancellor of the Exchequer Jeremy Hunt unveiled the government’s latest tax and spending plans saying “we back British business” announcing 110 growth measures which he said would boost business investment by £20bn a year. The Chancellor said the government had taken difficult decisions to put the economy “back on track” and claimed, “our plan for the British economy is working.” He also stressed that “the work is not done,” before outlining his package of measures which he said would cut business taxes, raise business investment and get more people into work.

OBR forecasts

Mr Hunt started his statement by revealing updated economic projections produced by the Office for Budget Responsibility (OBR) which he said showed the government had delivered on all three of the Prime Minister’s economic priorities: to halve inflation, grow the economy and reduce debt.

The Chancellor began with inflation, reiterating that recently released official data showed the Consumer Prices Index (CPI) rate had more than halved from a peak of 11.1% in October 2022 to 4.6% last month. He then detailed some of the latest OBR projections, which suggest inflation will fall to 2.8% next year and hit the government’s 2% target in 2025.

Growth measures

In terms of growth, Mr Hunt said the OBR now expects the economy to expand by 0.6% this year, 0.7% in 2024 and 1.4% in 2025. While this year’s figure is a considerable improvement on the OBR’s previous prediction of a small contraction, the forecast for the following two years represents a relatively sharp downgrade from the previous forecast of 1.8% for 2024 and 2.5% for 2025.

The Chancellor acknowledged that the private sector is more productive in countries like the US, Germany and France and that, “If we want those [growth] numbers to be higher, we need higher productivity.” He also said that the measures being announced today would help close the productivity gap by “boosting business investment by £20bn a year.”

Backing British business

The 110 measures aimed atcreating the right conditions for the private sector to thrive include:

  • The ‘full expensing’ tax break for businesses has been made permanent, at a cost of £11bn a year – representing “the largest business tax cut in modern British history”
  • Delivering energy security and the net zero transition by removing barriers to investment in critical infrastructure
  • An extension to the 75% business rate discount for retail, hospitality and leisure businesses
  • The simplification of Research & Development (R&D) tax reliefs and lowering the threshold for additional support for R&D intensive loss-making SMEs
  • To unlock investment, support levelling up and enable the UK to seize growth opportunities through the transition to net zero, the government is making £4.5bn available in strategic manufacturing sectors – auto, aerospace, life sciences and clean energy – from 2025 for five years.

Turning his attention to the small business community, Mr Hunt said, “I have always known that every big business was a small business once,” as he announced a package of measures designed to support SMEs across the UK. Following consultation with the Federation of Small Businesses (FSB), Mr Hunt argued that tougher regulation was needed to stop the “scourge of late payments.” He announced that businesses bidding for large government contracts over £5m will have to prove they pay their invoices within an average of 55 days, reducing progressively to 30 days. On business rates, he announced a freeze on the small business multiplier for a further year, amongst other measures.

Personal taxation, wages and pensions

As recently announced, the government will increase the National Living Wage for individuals from £10.42 an hour to £11.44 an hour, with the threshold lowered from 23 to 21-years-old, effective from 1 April 2024.

The commitment to the pensions Triple Lock remains, meaning that the basic State Pension, new State Pension and Pension Credit standard minimum guarantee will be uprated in April 2024 in line with average earnings growth of 8.5% (September 2023). The value of the new State Pension will increase in April 2024 from £203.85 per week to £221.20 per week, while the basic State Pension will rise from £156.20 to £169.50 per week.

Universal Credit and disability benefits will increase by 6.7% next tax year, equivalent to CPI inflation in the 12 months to September 2023, which is the typical basis for benefit uprating. This represents an average increase of £470 for 5.5 million households next year.

Changes to National Insurance contributions (NICs) were revealed:

  • The main rate of Class 1 employee NICs is to be reduced from 12% to 10%. This will provide a tax cut for 27 million working people. Instead of taking effect on 6 April 2024, this will take effect from 6 January 2024
  • To simplify NICs for the self-employed, from 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs (currently £3.45 a week), but will continue to receive access to contributory benefits, including the State Pension. In addition, Class 4 NICs will be cut by 1 percentage point to 8% from April 2024
  • The government is extending the NICs relief for employers of eligible veterans for one year. Businesses pay no employer NICs on annual earnings up to £50,270 for the first year of a qualifying veteran’s employment.

No changes were announced for the following allowances:

  • The Income Tax Personal Allowance and higher rate threshold remain at current levels – £12,570 and £50,270 respectively – until April 2028 (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
  • Inheritance Tax bands remain at £325,000 nil-rate band, £175,000 residence nil-rate band, with taper starting at £2m – fixed at these levels until April 2028
  • The 2024/25 tax year ISA (Individual Savings Account) allowance remains at £20,000 and the JISA (Junior Individual Savings Account) allowance and Child Trust Fund annual subscription limits remain at £9,000. The government will allow multiple subscriptions to ISAs of the same type every year from April 2024
  • The Dividend Allowance will reduce to £500 from April 2024
  • The annual Capital Gains Tax exemption will reduce to £3,000 from April 2024
  • The government will legislate in the Autumn Finance Bill 2023 to remove the Lifetime Allowance to clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements. This will take effect from 6 April 2024.

The latest steps to deliver the Mansion House Reforms for pensions, announced in the days leading up to the Autumn Statement, include:

  • A call for evidence on allowing individuals to consolidate pensions by having one pension pot for life
  • New investment vehicles tailored to the needs of pension schemes, which allow investment into the UK’s innovative companies.

Levelling up

Next, the Chancellor spoke about ‘levelling up’ measures designed to support growth and investment, starting with three new Investment Zones set to be introduced in Greater Manchester, the West Midlands and the East Midlands. Together, he said, these Investment Zones will generate £3.4bn of private investment and create 65,000 jobs over the next decade.

Also included in the measures:

  • A second Investment Zone for Wales covering Wrexham and Flintshire
  • Investment Zone and freeport tax reliefs to be extended from five to 10 years
  • A new £150m Investment Opportunity Fund to support Investment Zones and freeports.

Back to work

The Chancellor then took the opportunity to reinforce his Back to Work Plan – worth £2.5bn – which was published the previous week. In addition to helping over a million people with long-term health conditions, disabilities and long-term unemployment issues to find and stay in work, the Plan also imposes tough sanctions on those who can work but choose not to.

Other key points

Alcohol duty – frozen until 1 August 2024

Mortgage Guarantee Scheme – extended until the end of June 2025

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) extension – the government will legislate in the Autumn Finance Bill 2023 to extend the existing sunset clauses from 6 April 2025 to 6 April 2035

Apprenticeships – £50m funding for a 2-year pilot to explore ways to stimulate training in growth sectors and address barriers to entry in high-value apprenticeships

Support for affected communities within the UK following the conflict in Israel and Gaza – funding that the government has already provided to the Community Security Trust will be maintained in 2024/25

Housing and planning investment – an additional £32m to unlock development of thousands of homes across the country, including funding to tackle planning backlogs in Local Planning Authorities (LPA), alongside further reforms to streamline the system through a new Permitted Development Right to enable one house to be converted into two homes

Creative industries – £2.1m of funding for the British Film Commission and the British Film Institute Certification Unit for 2024/25.

Closing comments

Jeremy Hunt signed off his Statement saying, “We are delivering the biggest business tax cut in modern British history, the largest ever cut to employee and self-employed National Insurance, and the biggest package of tax cuts to be implemented since the 1980s. An Autumn Statement for a country that has turned a corner. An Autumn Statement for Growth, which I commend to the House.”

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

Home insurance claims?

Home insurance offers protection against the most likely things that can go wrong in your home. While we often think of outside threats like theft or fire, a new study1 has shown that more claims result from clumsiness than malice. 

Accidents happen 

Accidental damage and escape of water are the most common reasons people claim on their home insurance, the study found. 

Of 76,518 claims made last year, accidental loss or damage at home accounted for more than a quarter, with escape of water making up another quarter of claims. 

Accidental damage is defined as sudden and unexpected damage to a property or contents by an outside force. This label is wide reaching, spanning everything from staining a carpet to drilling through a pipe. 

What else? 

Other reasons for claims included storm damage (13%), theft (7%) and accidental loss or damage away from home (7%). The least common reasons to claim included leakage of oil (108), property owners’ third-party liability (10) and arson, which recorded just seven incidents. 

Come what may… 

However careful you are, it is a fact of life that accidents happen. When damage occurs, having the right home insurance in place to cover it provides crucial peace of mind. We can help you find the best protection for your circumstances. 

1GoCompare, 2023 

The complexities of succession planning 

Succession, the hugely popular TV show, highlights the complexities of wealth transfer. There’s a lot to think about when passing on your wealth – as well as the risk of family disputes, tax implications need to be taken into consideration. 

Preserving, planning and communication 

As families accumulate wealth and assets it becomes important to preserve these and to plan the transfer across generations. Without a solid succession plan, a family’s hard-earned wealth could be at risk of erosion or loss, leading to potential disputes down the line. 

Open communication through proactive discussions with all family members is important. 

Take care with property 

If you’re planning to gift property during your lifetime, you need to be aware of complicated Inheritance Tax (IHT) rules around this. For example, if you gift a house to a family member but continue to benefit from it in some way, it will remain part of your estate when you die and HMRC could tax your loved ones at 40% on anything over the tax-free threshold. 

Reclaiming overpaid IHT 

Even when the estate has paid any IHT that’s due, that’s not the end of the story. 

Following several years of significant house price growth during the pandemic, property prices are now falling. This means that properties that were valued for IHT at the height of the pandemic are now likely to sell for less. Over the years, stock market volatility due to political and economic uncertainty has also led to investment losses for many. So, the IHT bill may have been overpaid and the estate will need to put in an overpayment claim. 

There’s plenty to consider. For support with your succession plans, get in touch. 

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

“We are beginning to win the battle against inflation”

Some positive economic news was delivered last week in the form of better-than-expected inflation data for October. The latest official release from the Office for National Statistics (ONS) revealed that in the 12 months to October, the Consumer Prices Index (CPI) rose by 4.6%, down from 6.7% in September. A Reuters poll of economists had predicted an October reading of 4.8%.

Falling from a peak of 11.1% in October last year, the annual rate has eased as household energy prices reduced year-on-year. Not all prices are falling, but many are rising less quickly.

Commenting on the largest one month fall in the annual CPI rate since April 1992, Chancellor Jeremy Hunt said, “Now we are beginning to win the battle against inflation we can move to the next part of our economic plan, which is the long-term growth of the British economy.”

Rishi Sunak has therefore met his target to halve inflation, a promise he made at the beginning of the year when the rate averaged 10.7% in the final quarter of 2022. Last week the Prime Minister said, “In January I made halving inflation this year my top priority … today, we have delivered on that pledge.”

The reading is likely to reduce concerns of a further increase in interest rates again this year, despite it being more than twice its 2% target. The final Monetary Policy Committee meeting of the year will conclude on 14 December.

UK retail sales 

ONS retail sales data for October has revealed that volumes fell unexpectedly, declining by 0.3% in the month, following a fall of 1.1% the previous month. With the cost of living and bad weather during October weighing on volumes, shoppers purchased less food and fuel during the month.

ONS Deputy Director for Survey and Economic Indicators commented on the data, “It was another poor month for household goods and clothes stores with these retailers reporting that cost of living pressures, reduced footfall and poor weather hit them hard.”

US – China relations

The President of the People’s Republic of China Xi Jinping travelled to the US last week, his first trip to the States in six years, where he met with President Joe Biden to discuss bilateral cooperation between the two nations. Among the key topics of conversation were the restoration of military communication, artificial intelligence, and agreements on curbing fentanyl production. After the meeting, the Chinese leader professed, “The China-US relationship has never been smooth sailing over the past 50 years and more… yet it has kept moving forward amidst twists and turns. For two large countries like China and the United States, turning their back on each other is not an option.”

Autumn Statement speculation

With Jeremy Hunt set to deliver his Autumn Statement on 22 November, speculation has been rife about possible inclusions. It appears less likely that rumoured changes to Inheritance Tax will be introduced until the Spring Budget, with Mr Hunt insisting that economic growth remains his current priority.  However, he has not ruled out cutting other taxes such as Income Tax or National Insurance. The Prime Minister added to this speculation on Monday, saying “We can now move on to the next phase of our economic plan and turn our attention to cutting taxes. We will do so seriously, we will do so responsibly, but that time is now here.”

There is also expected to be a focus on business taxes, as cutting them is seen as key to helping the economy to grow. On support for businesses, the Prime Minister said he wanted to help companies “invest, innovate and grow through lower taxes and simpler regulation.“

There has been speculation about benefit values which are normally uprated each April with the inflation rate of the previous September. The government may consider using the October rate of 4.6% rather than September’s 6.7%. According to The Institute for Fiscal Studies (IFS), this would cut working-age benefits spending by about £3bn in 2024/25. 

The Chancellor will also unveil the latest economic update and forecasts produced by the Office for Budget Responsibility (OBR).

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 (22 November 2023)

Residential Property Review – November 2023 

Residential supply and demand less downbeat 

According to the Royal Institution of Chartered Surveyors (RICS) October UK Residential Market Survey, demand is still falling faster than supply. 

New buyer enquiries posted a net balance of -28% during October, marking eighteen successive months in which this indicator has been in negative territory. Nevertheless, the latest reading is less downcast compared to a figure of -37% seen in the September survey and represents the least negative return since May 2023.  

For agreed sales, the latest net balance of -25% is consistent with generally weak activity levels over October. However, the reading is again less negative than figures of -45% and -35% recorded in August and September respectively. 

New residential listings coming to market continue to slow, evidenced by a net balance reading of 

-7% for October. Respondents to the survey report that the number of market appraisals undertaken over the month is below that seen in the equivalent period of last year, with a net balance of -51%. 

Fixer uppers are most in demand 

When looking at more than 600,000 property listings to see which features led to the highest number of enquiries to estate agents, Rightmove has found that fixer-upper homes, or those that are described as needing refurbishment, are at the top of the list for buyers. 

Two groups of buyers compete for this type of home: first-time buyers looking for a cheaper property to get on the ladder which they can refurbish over time and investors looking to grab a  bargain and do it up to sell or rent out. 

Conversely, house hunters looking for a refurbished home can expect to pay an extra £70,000 on average for the privilege (19% more than the average national house price). 

Rightmove’s Tim Bannister commented, “This really shows the different priorities that home-movers have – some are in a more fortunate position to be able to consider buying a newly refurbished home, while others want to put their own stamp on a home and do it up from scratch, or they may realise that if they buy now they can spend time doing up the house a room at a time.” 

New Housing Minister  

As part of the government reshuffle, Lee Rowley has replaced Rachel Maclean as Housing Minister.  

Rowley is the sixteenth Housing Minister since the Conservatives came into power in 2010 and he held the same position during the short-lived premiership of Liz Truss. He will oversee the Renters’ Reform Bill, which is now at Committee stage, with findings scheduled to be reported back to the House of Commons by 5 December 2023. 

The new Housing Minister will also address the Leasehold and Freehold Bill, confirmed in the recent King’s Speech. This Bill aims to eliminate punitive service charges and facilitate easier acquisition of freeholds by leaseholders. 

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 – November 2023

ESG credentials come to the fore in the industrial and logistics sector  

November’s UK Commercial Market in Minutes from Savills has highlighted the continued robustness in the industrial and logistics sector, despite a reduction in take-up during the year due to economic uncertainty.  

The weaker demand has given warehouse space occupiers the opportunity to be more selective about their requirements, which has created a ‘significant gap when it comes to prime and secondary rents as businesses look to prioritise ESG credentials,’ according to the report. As occupiers focus more than ever on the quality of space, ESG requirements have become a key consideration for all third-party logistics providers to succeed in gaining customer contracts.  

The financial benefits to firms from efficiencies derived from acquiring Grade A space, mean it’s now near the top of the wish list when it comes to tenants selecting a new warehouse unit. Occupiers are also appreciating the benefits in attracting and retaining staff that a contemporary, well-specified building can provide.  

From a rental perspective, although supply is rising, prime unit rents are still rising, recording a 5.8% increase, versus 0.3% for secondary space. With take-up of second hand stock lagging and achieving rental levels lower than prime units, landlords and developers need to be mindful of the requirement for redevelopment or refurbishment of stock to satisfy potential occupiers’ ESG requirements. 

Retail recovery ‘yet to begin in earnest’ 

The latest Royal Institution of Chartered Surveyors (RICS) market update indicates the resilience of retail transaction volumes in Q3, reaching a five-year high of £1.9bn.  

Although retail volumes have experienced a more positive period, yield data from CBRE indicates ‘a turnaround in the retail sector has yet to begin in earnest.’ At a headline level, retails yields average 7.2% at present, versus 6.5% at the start of 2023. 

Scottish commercial property investment likely to ‘pick-up’ in 2024 

Colliers recent Property Snapshot of the Scottish Commercial Market shows that during Q3, investment volumes slowed from £500m in Q2, to £330m. This figure is approximately 33% below the 5-year quarterly average.  

In the year to the end of Q3, total investment volumes registered £1.1bn, this is a 47% reduction on the 2022 Q1-Q3 figure recorded. Year-to-date (end Q3) from a sector perspective, 32% of investment activity can be apportioned to the retail sector, followed by 26% for offices and 15% for industrial. 

During the third quarter, a total of 32 deals were transacted, the average lot size of which was £10m, a reduction from an average of £13m the previous quarter. According to the report, transaction volumes have been hindered by a ‘scarcity of accessible financing options,’ with a recovery heavily dependent on a combination of lower debt costs and bond yields, plus a recovery in asset process. 

Looking ahead, Colliers believe that investment activity is ‘likely to remain subdued’ during the fourth quarter, but into 2024 they’re expecting ‘a pick-up… when investor sentiment improves, and interest rates and inflation continues to fall.’ 

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.