Starting early in the new tax year 

A new tax year has begun and with it comes the chance to start your tax planning early, but why rush when there’s almost a year to go? Here are a few reasons: 

  • You can take advantage of various tax allowances available for the year, such as your Individual Savings Account (ISA) and pension annual allowances 
  • You’re likely to benefit from having your money invested for longer. Some interesting research1 has found that an investor could potentially lose up to £25,000 over 25 years by investing the maximum into their ISA at the end of the tax year rather than at the start 
  • If you can’t invest a lump sum, you can set up a regular payment into your ISA or pension, to spread the cost over 12 months 
  • Avoiding the last-minute rush allows you to get everything done 
  • You can establish a system for keeping track of all your income, expenses and other financial transactions throughout the year, helping you to budget 
  • There is time to research your options and get financial advice to make informed decisions. 

Why not get the new tax year off to the best start – get in touch. 

1Vanguard, 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. 

Selling your house this spring

If you’re planning to put your home up for sale, there’s a lot to think about right now. As the first daffodils start to bloom across gardens and verges, the housing market usually blossoms too. 

In 2023, with expectations of slowing demand and house price falls, it has never been more important to focus on the fundamentals of selling a house. Here are some things you should think about before the ‘For Sale’ sign goes up. 

Buyers aplenty 

The overall market might seem to indicate waning demand. However, to sell a house, you only need to find one keen buyer – and there are plenty still out there! 

The number of views of homes for sale on Rightmove soared by 20% between the week commencing 19 December and Boxing Day week1. The “promising activity and familiar patterns over the festive period… are good signs for the year ahead,” commented Rightmove’s Tim Bannister. 

Focus on what you can control 

With house prices forecast to fall, some potential sellers are rushing to the market and others are holding off until conditions stabilise. It is important, though, not to become fixated on market movements. 

Instead, focus on the things you can control. Making your house as marketable as possible before listing will help you maximise your chances of achieving a good price. Some easy ways to add value and ensure a speedy sale include: 

  • Removing clutter before viewings. Your house shouldn’t look empty, but prospective buyers need to be able to picture themselves living there 
  • Making minor repairs can reassure buyers they won’t have too much work to do when they move in. Small details can make a big difference 
  • Controlling the smells of your home can make a big difference to a viewing experience. A fresh spring scent might not seal the deal on its own, but it won’t put buyers off! 

Ask the experts 

Are you looking to move this year? Have you considered your mortgage options? Get in touch today to see how we can help get you moving this spring. 

1Rightmove, 2023 

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

Spring Budget 2023 – key points 

Chancellor Jeremy Hunt delivered the Spring Budget on 15 March declaring it to be “A Budget for Growth.” The fiscal update included a range of new measures, starting with the latest economic projections from the Office for Budget Responsibility (OBR): 

  • The UK economy is expected to contract by 0.2% this year, with growth predicted to hit 1.8% in 2024 and 2.5% in 2025. A technical recession is expected to be avoided in 2023 
  • Inflation is predicted to fall from an average rate of 10.7% in Q4 2022 to 2.9% by the end of this year. This decline is partly due to the three-month extension to the Energy Price Guarantee (EPG), which the government confirmed on 15 March. 

The Chancellor’s strategy for growth focuses on four pillars ‘Everywhere, Enterprise, Employment and Education.’ Key areas within these pillars include: 

  • Investment for ‘Levelling-Up’ initiatives 
  • Providing the right conditions for businesses to succeed 
  • New measures to get people back to work, including childcare support. 

Pensions 

The spotlight also fell on pensions. To encourage over-50s to extend their working lives, the government is increasing tax relief limits on pension contributions and pots: 

  • The Annual Allowance will be raised from £40,000 to £60,000 from April 2023; the Lifetime Allowance (LTA) charge will be removed from April 2023, and the LTA will be abolished from April 2024 
  • The maximum amount that can be accessed tax free (Pension Commencement Lump Sum) will be frozen at its current level of £268,275 (25% of current LTA) 
  • From April, the minimum Tapered Annual Allowance (TAA) and the Money Purchase Annual Allowance (MPAA) will increase from £4,000 to £10,000. The adjusted income threshold for the TAA will also rise, from £240,000 to £260,000. 

In addition, previously announced State Pension increases from April 2023 are as follows: 

  • Basic State Pension – increase to £156.20 per week 
  • Full new State Pension – increase to £203.85 per week. 

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

“Now is not the time for complacency”

Speaking at an event last week, Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva outlined the financial agency’s global growth expectations for 2023. The Fund believe, that despite labour market resilience and strengthening consumer demand, economic growth will drop below 3% this year and remain at around 3% over the next five years. This estimate represents the global lender’s lowest medium-term growth forecast in over thirty years and sits below the average growth rate of 3.8% seen in the last twenty years.

Ms Georgieva indicated that prospects remain weak in the face of persistently high inflation, adding that recent issues in the banking sector in Europe and the United States have exposed financial vulnerabilities that have contributed towards increased risks for the global economy. She highlighted, “With rising geopolitical tensions, with inflation still running high, a robust recovery remains elusive, and that harms the prospects of everyone, especially for the most vulnerable people and the most vulnerable countries.”

Expectations from the IMF signal that half of global growth this year will be attributed to China and India, with around 90% of advanced economies experiencing a reduction in their growth rate in 2023. Countries with low incomes, hampered by weakening export demand and higher borrowing costs, are likely to experience per-capita income growth below emerging economies.

Addressing the recent banking sector woes and praising policymakers’ fast response to stress in the sector, Ms Georgieva commented, “The key is to carefully monitor risks in banks and non-bank financial institutions, as well as weaknesses in sectors such as commercial real estate. Now is not the time for complacency.” Despite some of the risks in the financial sector being “more exposed,” she maintains “full confidence” that central banks are being vigilant.

With spring meetings between the IMF and World Bank scheduled to commence this week, further details of growth expectations for the year ahead and the direction of the global economy will be released in the coming days.

Good Friday shopping exceeds expectations

Data from Springboard has shown that High Street footfall on Good Friday ‘exceeded all expectations,’ signalling a ‘continuation of strong activity.’ Both shopping centres and retail parks also experienced an increase in customers year-on-year. However, despite the promising turnout, overall footfall fell by 11% when compared with pre-pandemic data from 2019.

Car sales impress in Q1

Last Wednesday, the Society of Motor Manufacturers and Traders (SMMT) reported that new car registrations rose for the eighth consecutive month in March. Following an 18.2% year-on-year jump, numbers reached 287,825 units last month, which makes Q1 2023 the strongest quarter since 2019.

Notably, battery electric vehicle (BEV) sales reached a record monthly high in March, an 18.6% year-on-year growth. Mike Hawes, CEO of the SMMT, commented, “The best month ever for zero emission vehicles is reflective of increased consumer choice and improved availability but if EV market ambitions – and regulation – are to be met, infrastructure investment must catch up.”

Post-Brexit border checks – a huge step forward?

Food logistics trade body the Cold Chain Federation has expressed concerns that fresh government plans for post-Brexit border controls on UK imports could deter many EU suppliers. The government proposals, required as per the UK’s trade agreement with the European Union, are hoped to limit delays by reducing the need for physical checks for many imported goods, with the Cabinet Office professing the measures are a ‘huge step forward for the safety, security and efficiency of our borders.’

However, the Cold Chain Federation is expecting the forms and costs involved to ‘fuel shortages and price inflation,’ with Chief Executive Shane Brennan commenting, “Six years since the UK started the process of leaving the EU and after two previous postponements to bringing in the necessary food controls, the proposals today are a massive disappointment. They solve none of the real risks facing our post-Brexit food supply chains and will exacerbate shortages on the shelf and food inflation… None of the fundamental problems have been solved and business have nowhere near enough time to prepare.”

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 (12 April 2023)

News in Review

“There’s underlying resilience in the UK economy”

On Friday, the Office for National Statistics (ONS) revised its Q4 2022 data showing that the UK economy performed better than previously estimated. UK gross domestic product (GDP) is now estimated to have increased by 0.1% in the final quarter, up from the previous estimate of no growth.

With the revision, it was revealed that telecommunications, construction and manufacturing performed better than initially thought. In output terms, the services sector grew by 0.1% and the construction sector grew by 1.3%.

The new figures confirm that the UK economy avoided falling into recession at the end of 2022. The level of real GDP in Q4 2022 is now 0.6% below where it was before the pandemic, revised upwards from the previous estimate of 0.8% below.

Separately, the Institute of Directors released a survey that showed improved demand, confidence, hiring and investment intentions in March, boosting hopes that the economy may be firmly back on track. Of more than 900 firms surveyed in March, exactly half reported that their order books were healthier than at the end of 2022.

Commenting on the ONS figures, Chancellor Jeremy Hunt said, “There’s underlying resilience in the UK economy … We will continue to take the difficult decisions necessary to bring down inflation caused by what’s happened in Ukraine. That is the way we will get back to healthy growth and relieve the pressure on families.”

Mixed bag for manufacturing

March is the eighth straight month in which UK manufacturing activity has fallen, according to figures released on Monday by the seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI). The headline reading fell to 47.9 in March, a fall from February’s seven-month high of 49.3 and below forecasts of 49.8.

Despite the negative reading, manufacturers continue to report improving supply conditions. Notably, cost pressures softened, with some lower commodity prices and falling freight rates passed on by suppliers. Delivery times improved too, with reports of shorter delivery times from suppliers at their most widespread since the survey started in 1992.

In response to these positive signs, business expectations rose, as shown by the PMI’s gauge of future output reaching its highest level since February 2022. Rob Dobson, director at S&P Global Market Intelligence, commented, “UK manufacturing production fell back into contraction at the end of the opening quarter, as companies scaled back production in response to subdued market conditions. There was better news on the price and supply fronts during March, however. […] Supply chains continued to recover from the immense pressure experienced over the past three-and-a-half years, with March seeing average vendor lead times improve to the greatest extent during the        31-year survey history.”

House prices down again

House prices across the UK are continuing to fall, according to the latest House Price Index from Nationwide, with a seventh consecutive monthly drop recorded in March.

On average, prices dropped by 3.1% year-on-year in March, the biggest annual decline since July 2009. All regions experienced a slowing in price growth in Q1, the report stated, while nine out of 13 regions saw annual prices fall. The West Midlands was the strongest performing region, with prices up 1.4% compared with a year ago.

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, cautioned, “It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation.”

Price of stamps

Since Tuesday, all standard Royal Mail stamps now feature King Charles’ portrait. A day earlier, the price of first-class stamps rose by 15p to £1.10, while second class stamps rose by 7p to 75p.

Oil surges as production held back

Oil prices surged on Monday after several of the world’s largest exporters announced surprise cuts in production. On Sunday, OPEC+ announced plans to lower output targets by a further 1.16 million barrels per day; in response, Brent crude prices rose by more than 6% on Monday.

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.

Economic Review – March 2023

UK expected to avoid recession

Revised forecasts from the Office for Budget Responsibility (OBR) suggest the UK will not enter recession this year despite households facing a record drop in spending power.

Chancellor Jeremy Hunt unveiled the independent fiscal watchdog’s latest projections during his Spring Budget statement delivered to the House of Commons on 15 March. Mr Hunt declared it was a “Budget for Growth” before announcing updated OBR figures which predict that, although the economy will contract this year, it will not now see two consecutive quarters of decline and thereby avoid the technical definition of a recession.

The updated figures suggest the UK economy will shrink by 0.2% over the course of this year – which represents a significant upgrade from last autumn’s forecast of a 1.4% contraction – with growth then expected to hit 1.8% in 2024 and 2.5% in 2025. This improved outlook comes in spite of a sharp fall in real household incomes which the OBR said was “the largest two-year fall in living standards since records began in the 1950s.”

Prior to the Chancellor’s statement, the latest monthly gross domestic product figures published by the Office for National Statistics (ONS) had confirmed that the UK economy is currently performing better than analysts had feared. ONS said the economy expanded by 0.3% in January; this represents a sharp rebound from December’s 0.5% decline and exceeded the consensus forecast in a Reuters poll of economists which had predicted a growth rate of 0.1%.

Survey data released towards the end of last month also suggests the economy is likely to have expanded across the whole of the first quarter. The preliminary headline figure from the S&P Global/CIPS UK Purchasing Managers’ Index came in at 52.2 in March, a second successive monthly reading above the 50 threshold which indicates growth in private sector output.

Inflation rises unexpectedly

The Bank of England’s Monetary Policy Committee (MPC) has continued its efforts to contain price rises by sanctioning another interest rate hike but said it believes February’s surprise jump in inflation was due to “one off elements” which will probably fade quickly.

Data released last month by ONS showed that the Consumer Prices Index (CPI) annual rate – which compares prices in the current month with the same period a year earlier – stood at 10.4% in February. This was a notable jump from January’s figure of 10.1% and significantly higher than the consensus forecast in a Reuters poll of economists which had predicted the headline inflation rate would actually fall to 9.9%.

ONS said the cost of food and drinks had the largest upward impact on February’s figure. Food prices rose at the fastest rate in 45 years partly due to shortages of some salad and vegetable items, while higher food and drink prices in pubs and restaurants also pushed the CPI rate up.

Prior to the unexpected inflation jump, analysts had been evenly divided over the outcome of March’s MPC deliberations. However, after release of the inflation data, a rate rise seemed inevitable and the MPC duly obliged, increasing Bank Rate by 0.25 percentage points on 23 March, the eleventh rise in a row.

Minutes to the MPC meeting played down the significance of February’s resurgence in inflation, reiterating the Committee’s belief that CPI is ‘likely to fall sharply’ across the rest of this year. Indeed, the minutes stated that inflation is expected to decline to a lower rate than previously anticipated due to the Chancellor’s ‘Energy Price Guarantee’ Budget announcement and further falls in wholesale energy prices, prompting speculation that the MPC may now pause its run of rate hikes. The Committee’s next decision will be announced on 11 May.

Markets (Data compiled by TOMD)

UK markets responded positively at month end after the UK’s 2022 Q4 GDP data was revised upwards, indicating that a recession had been avoided in the second half of 2022. Slower-than-expected inflation data in the US added to hopes of a pause in interest rate hikes from the Federal Reserve.

In the UK, the FTSE 100 ended March on 7,7631.74, a loss of 3.10% in the month. The domestically focused FTSE 250 closed the month down 4.90% on 18,928.30, while the FTSE AIM closed March on 809.27, a monthly loss of 5.83%.

Across the pond, the Dow Jones index closed March up 1.89% on 33,274.15, while the NASDAQ closed the month up 6.69% on 12,221.91. On the continent, the Euro Stoxx 50 closed the month on 4,315.05, registering a gain of 1.81%. In Japan, the Nikkei 225 closed March up 2.17%, on 28,041.48.                

On the foreign exchanges, the euro closed the month at €1.13 against sterling. The US dollar closed at $1.23 against sterling and at $1.08 against the euro.

Gold closed the month trading at around $1,979 a troy ounce, a monthly gain of around 8%. The gold price continues to rise as demand for the precious metal holds firm with expectations of the Fed easing interest rate hikes and a crisis of confidence in some major European lenders and US regional banks. Brent crude closed the month trading at around $80 a barrel, a monthly loss of around 4.5%.

    

UK pay growth slows

Both official statistics and survey data released during the past month suggest that the rate of growth in wages may have started to stall.

The latest pay data published by ONS showed that average weekly earnings excluding bonuses rose at an annual rate of 6.5% in the three months to January. This compares with a figure of 6.7% in the October-to-December period, the first slowdown recorded in this measure of wage growth since late 2021.

Additionally, the data revealed that growth in pay levels continues to be outstripped by rising prices. After adjusting for inflation, regular pay actually fell by 2.4% in the three months to January compared to the same period a year earlier. This represents one of the largest falls in real wages since comparable records began in 2001.

Recently released research also suggests that the rate of growth in pay may now have passed its peak. According to a survey of 266 organisations conducted by HR specialists XpertHR, UK employers expect to see a slight fall in pay awards over the course of this year, with pay settlements as a whole predicted to average 5% during 2023, down slightly from the current level of around 6%.

Retail sales rise in February

The latest official retail sales statistics have revealed another surprise monthly jump in sales volumes, while more recent survey evidence points to emerging “shoots of optimism” within the retail sector.

According to ONS data, sales volumes rose by 1.2% in February, the largest monthly gain since October last year. Data revisions also revealed that sales in the previous month grew more strongly than originally reported, with January’s figure revised up to a 0.9% rise.

ONS Director of Economic Statistics Darren Morgan, however, did note that the broader picture remains “subdued” with price rises continuing to hit consumer spending power. Mr Morgan added, “In the latest month, discount department stores performed strongly with food shops also doing well as consumers, confronted with cost-of-living pressures, cut back on eating out or purchasing takeaways.”

Survey data released last month though did highlight further signs of positivity with GfK’s consumer confidence index hitting its highest level in a year. March’s CBI Distributive Trades Survey also reported the first positive sales expectations amongst retailers for seven months, with CBI Principal Economist Martin Sartorius commenting, “Activity in the retail sector showed signs of stabilising after a challenging winter. This resilience has helped inspire some spring shoots of optimism.”

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

All details are correct at the time of writing (03 Apr 2023).

Economic Review – March 2023

UK expected to avoid recession

Revised forecasts from the Office for Budget Responsibility (OBR) suggest the UK will not enter recession this year despite households facing a record drop in spending power.

Chancellor Jeremy Hunt unveiled the independent fiscal watchdog’s latest projections during his Spring Budget statement delivered to the House of Commons on 15 March. Mr Hunt declared it was a “Budget for Growth” before announcing updated OBR figures which predict that, although the economy will contract this year, it will not now see two consecutive quarters of decline and thereby avoid the technical definition of a recession.

The updated figures suggest the UK economy will shrink by 0.2% over the course of this year – which represents a significant upgrade from last autumn’s forecast of a 1.4% contraction – with growth then expected to hit 1.8% in 2024 and 2.5% in 2025. This improved outlook comes in spite of a sharp fall in real household incomes which the OBR said was “the largest two-year fall in living standards since records began in the 1950s.”

Prior to the Chancellor’s statement, the latest monthly gross domestic product figures published by the Office for National Statistics (ONS) had confirmed that the UK economy is currently performing better than analysts had feared. ONS said the economy expanded by 0.3% in January; this represents a sharp rebound from December’s 0.5% decline and exceeded the consensus forecast in a Reuters poll of economists which had predicted a growth rate of 0.1%.

Survey data released towards the end of last month also suggests the economy is likely to have expanded across the whole of the first quarter. The preliminary headline figure from the S&P Global/CIPS UK Purchasing Managers’ Index came in at 52.2 in March, a second successive monthly reading above the 50 threshold which indicates growth in private sector output.

Inflation rises unexpectedly

The Bank of England’s Monetary Policy Committee (MPC) has continued its efforts to contain price rises by sanctioning another interest rate hike but said it believes February’s surprise jump in inflation was due to “one off elements” which will probably fade quickly.

Data released last month by ONS showed that the Consumer Prices Index (CPI) annual rate – which compares prices in the current month with the same period a year earlier – stood at 10.4% in February. This was a notable jump from January’s figure of 10.1% and significantly higher than the consensus forecast in a Reuters poll of economists which had predicted the headline inflation rate would actually fall to 9.9%.

ONS said the cost of food and drinks had the largest upward impact on February’s figure. Food prices rose at the fastest rate in 45 years partly due to shortages of some salad and vegetable items, while higher food and drink prices in pubs and restaurants also pushed the CPI rate up.

Prior to the unexpected inflation jump, analysts had been evenly divided over the outcome of March’s MPC deliberations. However, after release of the inflation data, a rate rise seemed inevitable and the MPC duly obliged, increasing Bank Rate by 0.25 percentage points on 23 March, the eleventh rise in a row.

Minutes to the MPC meeting played down the significance of February’s resurgence in inflation, reiterating the Committee’s belief that CPI is ‘likely to fall sharply’ across the rest of this year. Indeed, the minutes stated that inflation is expected to decline to a lower rate than previously anticipated due to the Chancellor’s ‘Energy Price Guarantee’ Budget announcement and further falls in wholesale energy prices, prompting speculation that the MPC may now pause its run of rate hikes. The Committee’s next decision will be announced on 11 May.

Markets (Data compiled by TOMD)

UK markets responded positively at month end after the UK’s 2022 Q4 GDP data was revised upwards, indicating that a recession had been avoided in the second half of 2022. Slower-than-expected inflation data in the US added to hopes of a pause in interest rate hikes from the Federal Reserve.

In the UK, the FTSE 100 ended March on 7,7631.74, a loss of 3.10% in the month. The domestically focused FTSE 250 closed the month down 4.90% on 18,928.30, while the FTSE AIM closed March on 809.27, a monthly loss of 5.83%.

Across the pond, the Dow Jones index closed March up 1.89% on 33,274.15, while the NASDAQ closed the month up 6.69% on 12,221.91. On the continent, the Euro Stoxx 50 closed the month on 4,315.05, registering a gain of 1.81%. In Japan, the Nikkei 225 closed March up 2.17%, on 28,041.48.                

On the foreign exchanges, the euro closed the month at €1.13 against sterling. The US dollar closed at $1.23 against sterling and at $1.08 against the euro.

Gold closed the month trading at around $1,979 a troy ounce, a monthly gain of around 8%. The gold price continues to rise as demand for the precious metal holds firm with expectations of the Fed easing interest rate hikes and a crisis of confidence in some major European lenders and US regional banks. Brent crude closed the month trading at around $80 a barrel, a monthly loss of around 4.5%.

    

UK pay growth slows

Both official statistics and survey data released during the past month suggest that the rate of growth in wages may have started to stall.

The latest pay data published by ONS showed that average weekly earnings excluding bonuses rose at an annual rate of 6.5% in the three months to January. This compares with a figure of 6.7% in the October-to-December period, the first slowdown recorded in this measure of wage growth since late 2021.

Additionally, the data revealed that growth in pay levels continues to be outstripped by rising prices. After adjusting for inflation, regular pay actually fell by 2.4% in the three months to January compared to the same period a year earlier. This represents one of the largest falls in real wages since comparable records began in 2001.

Recently released research also suggests that the rate of growth in pay may now have passed its peak. According to a survey of 266 organisations conducted by HR specialists XpertHR, UK employers expect to see a slight fall in pay awards over the course of this year, with pay settlements as a whole predicted to average 5% during 2023, down slightly from the current level of around 6%.

Retail sales rise in February

The latest official retail sales statistics have revealed another surprise monthly jump in sales volumes, while more recent survey evidence points to emerging “shoots of optimism” within the retail sector.

According to ONS data, sales volumes rose by 1.2% in February, the largest monthly gain since October last year. Data revisions also revealed that sales in the previous month grew more strongly than originally reported, with January’s figure revised up to a 0.9% rise.

ONS Director of Economic Statistics Darren Morgan, however, did note that the broader picture remains “subdued” with price rises continuing to hit consumer spending power. Mr Morgan added, “In the latest month, discount department stores performed strongly with food shops also doing well as consumers, confronted with cost-of-living pressures, cut back on eating out or purchasing takeaways.”

Survey data released last month though did highlight further signs of positivity with GfK’s consumer confidence index hitting its highest level in a year. March’s CBI Distributive Trades Survey also reported the first positive sales expectations amongst retailers for seven months, with CBI Principal Economist Martin Sartorius commenting, “Activity in the retail sector showed signs of stabilising after a challenging winter. This resilience has helped inspire some spring shoots of optimism.”

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

All details are correct at the time of writing (03 Apr 2023).

On the up – downsizing

Cost-of-living difficulties are forcing people to reconsider their housing situations, with a new survey1 showing that three in 10 UK homeowners are considering saving money by moving to a smaller property, relocating or living with others.

Race for space?

After the pandemic-induced race for space, downsizing is back on the cards. Almost one in five respondents have considered downsizing, while 4% have so far made the move to a smaller home to meet increasing costs.

Six in 10 said moving to a smaller home would be something they might consider to help with the cost of living.

Regional variation

Homeowners in central London are especially drawn to downsizing or relocating, with more than a third thinking of moving elsewhere to help their financial position.

Yorkshire and the Humber residents were the least prone to downsizing, while homeowners in the North East were least likely to consider relocating.

Cash for space

In total, of those considering downsizing, more than seven in 10 cited the lower cost of living as a benefit. The research quantified the decision to downsize as a £120,820 saving for each bedroom given up.

Though this could be a significant saving, the downsides to downsizing were also mentioned by respondents, namely moving costs (39%), a lack of personal space for belongings (38%), distance from family and friends (29%) and being in an unfamiliar area (28%). For help weighing up your options, get in touch.

1Halifax, 2022

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

Insuring your solar panels?

More people are installing solar panels to their homes, spurred on by environmental concerns or the prospect of reduced reliance on the National Grid. Putting thousands of pounds on your roof can boost the value of your property, but do solar panels affect your home insurance?

Come rain or…

Having emerged in the 1950s, solar technology has come a long way; more than a tenth of the UK electricity supply now comes from solar power in the summer months1. Moreover, contrary to popular opinion, solar panels are not only effective in fair weather: they typically generate between 10% and 25% of their standard power output on non-sunny days.

Is solar worth it?

The initial outlay for installing solar panels is often significant, though many studies point to the longer-term benefits of the investment. With energy bills sky high and forecast to rise further, the average household with solar panels is estimated to save between £210 and £514 per year2. Additionally, panels can earn you cash for electricity generated that you don’t use.

Home insurance impacts

Most home insurance policies now include solar panels as standard. Insurers consider solar panels to be part of your house, no different from the roof or walls, which means they are usually fully covered by buildings insurance. Since solar panels are usually included as standard, it shouldn’t cost anything extra to get them insured.

Even so, it’s always best to check with your insurer. Indeed, keeping your insurer up to date on any significant changes to your property is good practice anyway as it helps them know exactly what’s included in the structure of your home.

1Government Energy Trends Report, September 2022

2Energy Saving Trust, 2022

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

News in Review

“We were really a bit on a knife edge as to whether there would be a recession… but I’m a bit more optimistic now”

Last Wednesday, the Bank of England’s Monetary Policy Committee (MPC) voted to increase Bank Rate to 4.25%, the highest level for 14 years.

Seven members of the committee opted for a 0.25% rise, with thetwo dissenting voices preferring to maintain it at 4%. Analysts now expect the rate to peak at 4.5% in the summer.

The decision to increase Bank Rate followed the announcement that inflation had reached 10.4% in the year to February, its highest level for 40 years. Although inflation is expected to fall significantly in the second quarter of 2023, higher prices continue to put a strain on household spending.

A higher Bank Rate will translate into increased mortgage costs for some homeowners, though savers could benefit from better returns. People with typical tracker mortgage deals will pay about £24 extra each month as a result of the latest rate rise.

Following the increase decision, Governor of the Bank of England Andrew Bailey said he is “much more hopeful” for the UK economy. “We were really a bit on a knife edge as to whether there would be a recession… but I’m a bit more optimistic now,” he added.

Second-hand strength boosts sales

Retail sales volumes rose by 1.2% in February, according to official figures released by the Office for National Statistics (ONS) on Friday, the biggest monthly gain since October 2022. Volumes have recovered to pre-pandemic levels, the ONS said, although remain 3.5% lower than a year ago.

The surprise boost resulted partly from a strong performance from discount and second-hand stores, such as auction houses and charity shops, amid ongoing cost-of-living difficulties. In total, non-food sales rose by 2.4% last month.

Food store sales rose too – by 0.9% in February compared to 0.1% in January. The ONS reported some anecdotal evidence, however, of reduced spending in restaurants and on takeaways because of cost-of-living pressures.

Darren Morgan, ONS Director of Economic Statistics, cautioned that, despite the positive data in February, “The broader picture remains more subdued, with retail sales showing little real growth, particularly over the last 18 months with price rises hitting consumer spending power.”

UK House Price Index

The latest UK House Price Index, released last Wednesday, presented a mixed picture, with average house prices rising by 6.3% in the year to January, down from 9.3% in December.

The average house price (£290,000) was £17,000 higher than a year previously. Across the UK, Northern Ireland (10.2%) and England (6.9%) have the biggest annual increases, ahead of Wales (5.8%) and Scotland (1.0%).

On a seasonally adjusted basis, however, the average house price decreased by 0.6% in January, following a decrease of 0.4% in December 2022.

Global financial stability at risk – IMF Chief

Speaking at a forum in Beijing on Sunday, Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva said that risks to financial stability had increased after recent turbulence in the banking sector, although she reiterated that she felt actions by advanced economies had helped to calm market stress. She expects the world economy to expand by under 3% this year, as scarring from the pandemic, the war in Ukraine and monetary tightening continue to weigh. She concluded, “Fortunately, the news on the world economy is not all bad. We can see some ‘green shoots,’ including in China.”

New SNP leader

Humza Yousaf has been chosen as the new Scottish National Party (SNP) leader and Scotland’s First Minister by the party membership. Following the surprise resignation of Nicola Sturgeon last month, Mr Yousaf defeated Kate Forbes and Ash Regan in a contest in which 50,490 of the SNP’s 72,169 members cast a ballot.

The 37-year-old, previously Scotland’s Health Secretary, will become the first Muslim to lead a major UK political party. He had been the clear favourite throughout the contest and won with 52.1% of the votes after second preference votes.

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