Time to review your resilience

Awareness of the importance of protection has risen since the pandemic and led many to reassess their financial and personal priorities. It’s sensible to review your protection cover once a year and to discuss it with those close to you to make sure it still meets your needs. 

Have the conversation 

Only half (52%) of unmarried adults who are in a relationship know whether their partner has a life insurance policy and more than a quarter (27%) of those who do know are unaware of the policy’s value1. 

Many people assume they will automatically be entitled to the life insurance payout in the event of their partner’s death. This may not necessarily be the case. So, consider whether the policy should be put in trust to ensure the proceeds go where you want them to. 

Prepare for financial shocks 

How would you cope if you became ill? Would you have to rely on your partner, or struggle on trying to work? Almost one in five (19%) working adults say they would have to rely on their partner’s income or savings if they were unable to work, with 19% struggling to pay their mortgage or rent if they were unable to work for two months due to illness or injury. Some 11% would resort to taking on debt such as a loan, overdraft, or credit cards2. 

It makes sense to review your situation carefully if you’re self-employed too. Only 6% of self-employed workers have an income protection policy and millions of self-employed people consider they would have to carry on working if they suffered an illness or injury. 

1Scottish Widows, 2023 

2LV=, 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. 

Economic Review – May 2023

UK growth forecasts upgraded

Revised projections released last month by both the Bank of England (BoE) and International Monetary Fund (IMF) suggest the UK economy is now set to avoid recession this year.

The BoE’s latest forecast predicts the economy will grow by 0.25% across the whole of 2023, a significant upgrade from February’s prediction of a 0.5% contraction. This improved outlook reflects a number of factors, including stronger than anticipated global growth, lower energy prices and the fiscal support announced by the Chancellor in his Spring Budget.

Updated IMF figures also show the UK is now unlikely to enter recession, with the international soothsayer predicting a growth rate of 0.4% for 2023; in comparison, its previous forecast had suggested the economy would contract by 0.3% over the course of this year. The IMF said growth would be helped by ‘resilient demand ‘as well as falling energy prices and praised the UK authorities for taking ‘decisive and responsible steps in recent months.’

The latest gross domestic product (GDP) figures published by the Office for National Statistics (ONS), however, highlight how fragile the recovery remains with growth still sluggish. Although GDP across the first three months of 2023 did edge up by 0.1%, a similar tepid pace as achieved during the final quarter of last year, monthly data revealed an unexpectedly sharp drop in output during March, with GDP actually declining by 0.3% during the month.

Recently released data from the closely watched S&P Global/CIPS UK Purchasing Managers’ Index (PMI), though, does suggest growth has picked up in the second quarter. May’s preliminary headline reading came in at 53.9, lower than April’s one-year high of 54.9, but comfortably above the 50 threshold that denotes growth in private sector output. Indeed, S&P Global noted that their PMI readings were consistent with ‘GDP rising 0.4% in the second quarter.’

Interest rates rise again

Last month, the BoE announced another hike in its benchmark interest rate and insisted it will ‘stay the course’ in its battle to bring down inflation.

Following its latest meeting, which concluded on 10 May, the BoE’s nine-member Monetary Policy Committee (MPC) voted by a 7-2 majority to raise Bank Rate by a further 0.25 percentage points. This was the 12th consecutive increase, taking rates to 4.5%, their highest level in almost 15 years.

Commenting after announcing the decision, BoE Governor Andrew Bailey made it clear that the Bank’s next moves would depend on the trajectory of forthcoming data. However, Mr Bailey did stress that, “We have to stay the course to make sure inflation falls all the way back to the 2% target.”

The minutes to the meeting also warned that the Bank now believes inflation will remain higher for a longer period, largely as a result of food price inflation which is ‘likely to fall back more slowly than previously expected.’ Its latest forecast, which was published alongside the rate decision, suggests inflation will fall to 5.1% by the end of this year, significantly higher than its previous forecast of 3.9%.

ONS data published two weeks after the MPC’s announcement confirmed that the headline rate of inflation remains stubbornly high. While it did fall from 10.1% in March to 8.7% in April, as the extreme energy price hikes seen a year ago dropped out of the calculations, the figure was much higher than the consensus forecast in a Reuters poll of economists which had predicted a rate of 8.2%.

April’s inflation data surprise has undoubtedly increased the likelihood of further rate hikes in the coming months. The next decision is due to be announced on 22 June with analysts now typically expecting another 0.25 percentage point rise.

Markets (Data compiled by TOMD)

At the end of May, global markets closed the month largely in negative territory, with investors awaiting the outcome of the key vote on the US debt ceiling. In addition, the latest economic data from China, which highlighted a further decline in manufacturing activity, also weighed on sentiment.

In the UK, the FTSE 100 ended the month on 7,446.14, a loss of 5.39%, while the mid cap FTSE 250 closed down 3.62% on 18,722.90 and the FTSE AIM closed May on 782.77, a monthly loss of 5.68%.

In the US, the Dow Jones index closed the month down 3.49% on 32,908.27, while the NASDAQ closed the month up 5.80% on 12,935.28. On the continent, the Euro Stoxx 50 closed May on 4,218.04, a loss of 3.24%. In Japan, the Nikkei 225 closed the month up 7.04%, on 30,887.88. The index recently reached historic highs in May, with market sentiment buoyed by the potential of the semiconductor and AI markets.

On the foreign exchanges, the euro closed the month at €1.16 against sterling. The US dollar closed at $1.23 against sterling and at $1.06 against the euro.

Brent crude closed the month trading at around $73 a barrel, a monthly loss of 8.60%. At month end, traders awaited news on progress of the US debt bill, digested the weak Chinese manufacturing data, and considered how the weakening growth could impact crude demand. Gold closed the month trading at $1,964.40 a troy ounce, a small monthly loss of 0.92%.

More optimistic outlook for retailers

Official retail sales statistics showed a slightly stronger-than-expected increase in sales volumes during April while survey evidence points to modestly rising levels of optimism within the retail sector.

The latest ONS retail sales figures revealed signs of consumer spending resilience, with volumes rising by 0.5% in April following March’s sharp decline when sales were hit by unusually wet weather. Furthermore, across the whole of the February-to-April period, sales volumes grew by 0.8% compared to the previous three months; this represents the largest increase recorded on this measure since August 2021.

Evidence from the recently released CBI Distributive Trades Survey suggests the trading environment does remain challenging with sales volumes dipping in the year to May. Sales are expected to stabilise in June, however, and retailers generally expect to see a modest improvement in their business situation over the coming three months.

Commenting on the survey findings, CBI Principal Economist Martin Sartorius said, “Looking ahead, there are some reasons for retailers to be more optimistic about the outlook. Consumer sentiment has been improving and households’ energy bills are set to decline from July. The resulting boost to incomes should help support retail sales going into the second half of this year.”

Unemployment rate edges higher

The latest batch of labour market statistics suggests a further softening in the jobs market with a rise in the rate of unemployment and another fall in the number of job vacancies.

ONS figures released last month showed that the unemployment rate during Q1 edged up to 3.9%, a 0.1 percentage point increase from the previous three months. This was higher than the median forecast in a Reuters poll of economists which had predicted the rate would hold steady at 3.8%.

In addition, the estimated total number of job vacancies fell by 55,000 during the three months to April, hitting its lowest level since mid-2021. This was the tenth consecutive decline, with ONS saying that companies continued to cite ‘economic pressures’ as a factor in holding back on recruitment.

The labour market update also reported the number of people not working due to long-term sickness at a new record high. Over two and a half million people are now not working due to health issues, with ONS saying the increase has been driven by a rise in mental health conditions among younger age groups, people suffering with back and neck pain, and a rise in post-viral fatigue.

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 (01 June 2023).

News in review

“The return to single digit inflation suggests the UK has turned a corner”

Official data released by the Office for National Statistics (ONS) last week revealed that inflation returned to single digits in April, following seven consecutive months residing above 10%. The Consumer Prices Index (CPI) increased by 8.7% in the 12-month period to April, down from 10.1% in March.

Driven by a drop in energy and gas prices, the fall in inflation was not as large as expected, with a Reuters poll of economists anticipating annual CPI of 8.2% to the end of April, while the Bank of England forecast stated 8.4%.

Although annual food inflation dipped for a second consecutive month, it remained robust at 19.1% in April, compared to 19.2% the previous month, while service inflation saw a 1.6% rise month-on-month.

Economies Director at the Institute of Chartered Accountants in England and Wales (ICAEW) Suren Thiru responded to the latest inflation statistics, “While still staggering, the return to single digit inflation suggests the UK has turned a corner in its fight against soaring prices after lower energy bills pulled down the headline rate.”

Mr Thiru continued, “This will be the first of the big falls in inflation this year, with the headline rate set to fall sharply over the summer once the expected reduction in Ofgem’s energy price cap drives down energy bills from July.”

IMF expectations for the UK economy shift

The inflation figures came hot on the heels of a statement from the International Monetary Fund (IMF) in which it outlined that the UK would no longer be entering recession in 2023. Instead, the IMF expects the UK to experience growth of 0.4% in the year, contrary to the previous month’s forecast of a 0.3% annual contraction. Kristalina Georgieva, the IMF’s Managing Director, praised the government for taking “decisive and responsible steps in recent months,” to stabilise the economy and fight inflation. The report noted that monetary policy will need to remain tight to keep inflation expectations ‘well-anchored.’ With IMF growth prospects for the UK stronger than Italy, Germany and France, Chancellor Jeremy Hunt said the report “credits our action to restore stability and tame inflation.”

Mortgage rates on the rise

Various mortgage lenders increased the rates of new deals at the tail end of last week, following release of the higher-than-expected inflation figures. Nationwide, one of Britain’s largest building societies, was one such lender, increasing rates on new fixed rate borrowing by up to 0.45 percentage points. A Nationwide spokesperson said of the increase, ”In the current economic environment… this will ensure our mortgage rates remain sustainable.” Other major lenders such as Halifax and Santander also upped their rates last week. In addition to product rate increases, fewer mortgages are on the market, with some lenders choosing to withdraw products.

Retail volumes expected to stabilise in June

Retail sales volumes fell in May compared with the same period last year, while staffing levels dropped sharply, the recent Confederation of British Industry’s (CBI) Distributive Trades Survey has found. Volumes fell to a balance of -10% in May from +5% in April. Stores surveyed are expecting sales volumes to stabilise in June as consumer confidence picks up and energy prices reduce. Principal Economist at the CBI, Martin Sartorius said retailers had reason to be optimistic about the outlook, “Consumer sentiment has been improving and households’ energy bills are set to decline from July… The resulting boost to incomes should help support retail sales going into in the second half of this year.”

Other key findings from the survey highlighted that internet sales fell in the year to May. Online volumes are also expected to reduce at a similarly moderate pace in June. Focusing on price growth in the year to May, it remained at a near multi-decade high in May, with prices expected to continue to increase at this rapid pace. In the year to May, retail sector employment fell for the third consecutive quarter running and at the fastest pace since February 2009. Retailers are expecting headcount to continue to contract going forward.

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 (31 May 2023)

Residential Property Review – May 2023

Mixed market signals in May 

Recent releases from Savills presented mixed signals for the residential market, with the UK Housing Market Update pointing to recovering market activity in May, even as the English Housing Supply Update for Q1 2023 revealed a quarterly drop of 20% in new homes completed. 

The number of new sales agreed in April was just -6% below the 2017-19 average for the month, according to TwentyCI. Two further indicators that have remained robust are mortgage approvals and completed sales volumes – the former rose to 85% of the 2017-19 average in March, according to the Bank of England, and the latter to 96% of the pre-pandemic average for March, according to HM Revenue & Customs. 

In contrast, after a near-record number of new homes were built in 2022, Q1 2023 saw the number of new homes completed decline by 20% compared to Q4 2022. Only 246,700 new homes were completed in the year to March 2023, 2% below the previous annualised quarter. 

Detached homes best performer in past decade 

The average price of UK detached homes has increased by 74% in the past decade, according to new research by easyMoney, making it the house type with the largest value increase over that period. 

Semi-detached homes now sell for 71.4% more than they did in 2013, while terraced homes have increased by 67.6% and flats by 51%. 

Jason Ferrando, CEO of easyMoney commented, “This research demonstrates just how secure property investment is in this country. Flats are, in general, an outlier. While all other property types enjoyed massive price boosts during the pandemic, flats recorded only their third-highest growth of the decade. This is because the pandemic and lockdowns instigated a race for space that flats simply cannot satisfy, and also because of the external cladding issues highlighted by the Grenfell tragedy and which continue to haunt high-rise buildings to this day.” 

Strongest post-Brexit year for London’s super-prime market 

London’s £10m-plus property market recorded its strongest performance since the 2016 Brexit vote in the year to March 2023. 

The lifting of pandemic restrictions and a more stable business environment paved the way for £3.1bn to be spent on 161 super-prime properties in the year to March 2023. This was significantly higher than the £2.5bn and 144 transactions in the previous 12-month period; sales had not been so high since 2015-16. 

There were 52 sales at £8m+ outside of London in the 12 months to March 2023, a yearly increase of 16% and the highest total in 15 years. Prime property outside London remains subject to strong competition, thanks to tight supply and resilient demand. 

All details are correct at the time of writing (24 May 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. 

Commercial Property Market Review – May 2023

Spotlight on UK retail 

The recently released shopping centre and high street spotlight from Savills for Q1 has highlighted that although the UK retail investment market has faced challenges, the occupational market has remained buoyant. 

From a volume perspective, emphasising consumer cautiousness in the face of high inflation, retail sales declined 3.2% year on year in March, however a marginal 0.6% uptick was recorded in Q1, the first Q1 improvement since August 2021. 

Value retailers spearheaded the sector outperformers. Primark is one such success story, registering a 19% uplift in its half-year figures to March 2023, and Pepco, owner of Poundland recorded Q1 revenue growth of 8.5% year-on-year. Value pharmacy chain Superdrug plans to open 25 new stores this year and value clothing retailer Peacocks looks set to take over 20 recently closed M&Co stores.  

Looking forward at retail consumer and occupational trends, the report lays out a brighter outlook, as improving consumer confidence and ‘marginal deflation’ indicate ‘healthier times for retail are imminent.’  

Stabilising L&I investment volumes 

One of the key findings from Cushman Wakefield’s UK Logistics and Industrial (L&I) National Outlook for Q1 has highlighted that although investment volumes have remained subdued, with just 53 transactions recorded during the period (versus 73 transactions in Q4 2022), sentiment has stabilised during Q1 with ‘pockets of cautious optimism returning to the market amidst improvements in headline economic indicators.’  

Total investment volumes in the quarter fell to £1.2bn, the lowest quarterly value recorded since Q2 2020, a result of ‘sustained price discovery’ in the sector, as the gap between purchaser and vendor aspirations narrows.  

The repricing of UK L&I assets, following the economic turmoil of September’s mini-budget and monetary policy tightening, is beginning to see results according to the report, and ‘induce quiet optimism.’  

Ed Cornwell, International Partner, Logistics & Industrial Cap Markets commented on the current state of investment volumes in L&I, “The sector’s rapid repricing has begun to attract investors back to the market, resulting in a cautious improvement in sentiment. Pricing models continue to be subject to wider economic factors but changes to investment strategy and risk appetite are beginning to bed in as investors adjust.”  

Grade-A office space reduces in Scotland  

Data from property services firm JLL has shown an increase in lease renewals in Glasgow and Edinburgh because of a lack of what it calls ‘flexible, sustainable office space.’  

In the capital, a combination of limited choice and economic uncertainty caused lease renewals to reach a record high of over 350,000 sq. ft last year, a trend continuing into 2023 with nearly 100,000 sq. ft of regears completing in Q1. And in Glasgow, a healthy Q1 take up of 60,000 sq. ft was accompanied by a further 35,000 sq. ft of lease renewals.  

All details are correct at the time of writing (24 May 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. 

Landlords tune in?

More than two in five landlords are not aware of the proposed Renters’ Reform Bill, a new study1 has claimed, despite the impact it will have on their portfolios. Should landlords be worried? 

What could change? 

The proposed legislation, which is set to be voted on before May 2023, includes many significant elements. If passed in full, the act will: 

  • Scrap section 21 ‘no fault’ evictions 
  • Create a register of landlords 
  • Introduce a private rented ombudsman to help enforce renters’ rights 
  • Make it illegal for landlords and agents to refuse to rent properties to people who receive benefits 
  • Give local authorities more power to enforce and protect renters’ rights. 

What do landlords think? 

The survey found that 47.55% of landlords are ‘Strongly Concerned’ or ‘Concerned’ about not being able to refuse to rent properties to people who receive benefits. 

Similarly, landlords are worried about changes to section 21 evictions (45.45%), private rented ombudsman (43.86%), property registration (42.65%) and the right to request a pet in their house (41.45%). 

Increased pressure to remain compliant will add to the pressures placed on landlords and could lead to some selling up, the study suggests. 

1Finbri, 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. 

Offsetting fiscal drag

The gradual reduction of disposable income due to inflation and changes in tax brackets, or frozen tax allowances, will weigh on your finances, causing ‘fiscal drag.’  

By implementing various strategies, you can potentially reduce the impact of fiscal drag on your investments and increase your chances of achieving your long-term financial goals.  

The worst thing to do is – nothing. By succumbing to inertia, you are more likely to pay increased levels of tax, whether in relation to Income Tax due to the frozen personal allowances and reduced Dividend Allowance, or other taxes including Capital Gains Tax (CGT) and Inheritance Tax (IHT).  

The good news – there are legitimate mitigation strategies and, depending on your personal circumstances, allowances and tax reliefs available. By using your Individual Savings Account (ISA) allowance or making your pension contributions early in a new tax year, you could benefit from extra potential growth, as well as receiving an element of your tax relief earlier on your pension and any pension contributions. Consider tax-efficient investments, diversify your portfolio and rebalance regularly to ensure your asset allocation remains aligned with your objectives and attitude to risk; rebalancing will help minimise the impact of fiscal drag over time.  

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

“The sky’s the limit for British and Japanese businesses and entrepreneurs”

Rishi Sunak attended the G7 Summit in Hiroshima on Thursday, stopping off in Tokyo to agree new defence and economic deals; a UK business summit for Japanese corporations in the capital has resulted in a reported £18bn investment in UK property, windfarms and other projects.

Over half the investment is earmarked for green hydrogen and offshore wind projects in Wales and Scotland, with £4bn for offshore wind projects off the Suffolk and Norfolk coastlines. According to Mr Sunak, the investment is a “massive vote of confidence in the UK’s dynamic economy… The sky’s the limit for British and Japanese businesses and entrepreneurs.” UK-Japan partnerships were also announced between semiconductor companies, armed forces and cyber-agencies.

At the summit, attention turned to relationships with China, with a communiqué stating that the G7 wanted ‘constructive and stable relations’ with Beijing. The G7 nations also reaffirmed their commitment to countering Russia’s aggression, with a visit from Ukraine’s President Zelensky stealing many of the headlines.

Adjusting Bank Rate “as necessary”

Speaking at the British Chambers of Commerce (BCC) Global Annual Conference last week, Andrew Bailey, Governor of the Bank of England (BoE), addressed the current state of the UK economy.

He spoke about the Bank’s commitment to return inflation to its 2% target, reassuring the audience that the Monetary Policy Committee (MPC) will take strides to adjust Bank Rate “as necessary”. He reiterated that further monetary policy tightening would be required “if there were to be evidence of more persistent pressures.”

Referring to the recent Monetary Policy Report (MPR) released in mid-May, which signalled a u-turn in UK growth expectations this year, Mr Bailey noted that the forecast is for modest growth. Commenting that the improved outlook is reflective of the reduction in wholesale gas prices, he elaborated, “There has also been greater resilience in the economy than we had expected. We can see that in the employment and unemployment numbers that have been stronger than expected. Fiscal policy has also given a boost to the economy and global growth has been holding up better than we thought particularly in the euro area and China.”

Referring to high food prices and their continuing impact on inflation in the UK, Mr Bailey said that expectations are for inflation to fall “sharply” as the year progresses. Data released by research firm Kantar confirmed that the rate at which food prices is rising fell for a second consecutive month in May. However, the data also revealed that there is a long way to go; prices were up by 17.2% from a year ago in the four weeks to the middle of May, only marginally below 17.3% recorded last month.

Boost to consumer confidence

Meanwhile, UK consumer confidence improved in May, according to GfK’s latest index. This is a fourth consecutive monthly rise, a climb of three points to -27, the highest since February 2022.

Commenting on the data, Joe Staton of GfK, said, “The cost-of-living crisis has been part of our daily financial reality for a long time, with double-digit inflation and record-high food prices. But despite those pressures, May sees an encouraging three-point uptick in consumer confidence. The headline score of -27 means we’re still deep in negative territory and a long way from any ‘sunny uplands’. However, the overall trajectory this year is positive and might reflect a stronger underlying financial picture across the UK than many would think.”

Borrowing at near-record highs

The UK government borrowed £25.6bn in April, a year-on-year rise of £11.9bn, according to data released by the Office for National Statistics (ONS). Although analysts were factoring in that inflation would push up interest payments on debt, the figure still beat expectations for the month. The costs of energy support schemes and increases in benefits also played a role in pushing borrowing to its second-highest April total since records began in 1993.

Reflecting on the figures, Chancellor Jeremy Hunt said, “Debt and borrowing remain too high now – which is why it’s one of our priorities to get debt falling. We’ve taken difficult but necessary decisions to balance the nation’s books, and if we stick to our plan and get our economy growing, then debt is set to fall.”

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

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

All details are correct at time of writing (24 May 2023)

News in Review

“We have to stay the course”

As widely expected, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) voted to increase Bank Rate by a quarter of a percentage point to 4.5%, at its meeting last week. Seven members of the committee voted to raise the rate, while two members favoured maintaining Bank Rate at 4.25%.

The twelfth consecutive rise, borrowing costs are now at their highest level since October 2008. The Bank has been raising rates in an attempt to lower inflation, which it now expects to fall more slowly than previously hoped. By the end of 2023, inflation is predicted to sit above 5%, contrary to its February forecast which cited ‘below 4%’ by year end. A resilient labour market and high food prices continue to impact. During a press conference following release of the MPC minutes, Andrew Bailey, BoE Governor, commented, “We have to stay the course to make sure inflation falls all the way back to the 2% target,” before stressing that the BoE was not making any indications about its next move, which would be data dependent.

In welcome news, the central bank lifted its economic outlook for the UK, predicting a recession will be avoided. GDP is expected to expand by 0.25% during 2023, better than the 0.5% contraction previously forecast. Bailey defended the u-turn in the Bank’s growth forecast, saying its “biggest upgrade” ever reflected the rapidly shifting economic landscape, with energy prices falling and economic activity stronger than expected.

Chancellor of the Exchequer Jeremy Hunt said it was good that the BoE is “no longer forecasting recession,” but added, “Today’s interest rate rise will obviously be very disappointing for families with mortgages, but unless we tackle rising prices, the cost-of-living crisis will only carry on – which is why we need to be resolute in sticking to our plan to halve inflation by the end of the year.”

The next MPC meeting is scheduled to conclude on 22 June.

US inflation below 5%

Price rises in the US fell to their lowest point in two years, according to official figures released last week, with milk and new cars driving inflation down to 4.9% in the year to April. This is the tenth consecutive month that price rises have slowed, after having peaked last June at 9.1%.

Meanwhile, US Treasury Secretary Janet Yellen is urging Congress to agree to raise the country’s debt ceiling. Should an agreement to increase the ceiling, which has been raised, extended or revised 78 times since 1960, not be forthcoming, the Federal Government could run out of money by early June.

UK GDP

The UK economy grew by 0.1% between January and March, according to data released by the Office for National Statistics (ONS) on Friday. The figures revealed that the economy contracted by 0.3% in March, as car sales and the retail sector suffered a bad month; other explanations for the slow quarter include strikes, cost-of-living pressures and the wet weather. The economy is still 0.5% smaller than pre-pandemic levels, the ONS said, and performed worse in the first quarter than other major economies, except Germany.

Record number of long-term sick

On Tuesday, the ONS released data that revealed employment edged up to 75.9% in the first three months of 2023. Despite that, the number of people not working due to long-term sickness rose to a record high of 2.55 million.

The rising employment rate was attributed to an increase in part-time employees and self-employed workers, though the unemployment rate also rose slightly to 3.9%. Meanwhile, vacancies fell on the quarter for the tenth consecutive period.

Neil Carberry, Chief Executive at the Recruitment and Employment Confederation, commented, “These figures show some gentle progress on bringing people back to the labour market, but we should be concerned by the high number of people who are economically inactive because they are sick, and progress on tackling inactivity overall is too slow.”

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

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

All details are correct at time of writing (17 May 2023)

On the trail of unpaid IHT

HMRC has set up a new specialist team to target estates of wealthy deceased individuals in order to check whether a greater Inheritance Tax (IHT) liability may have been due than originally calculated by estate executors. This clampdown has seen record amounts of unpaid tax being clawed back by HMRC with levels expected to rise further in the coming years. 

Record sums recovered 

Data obtained through a Freedom of Information request has revealed that a total of £326m was collected by HMRC as a result of targeted IHT investigations in the year to March 2022. This was the largest amount ever recovered and represents a 28% increase on the amount raised by investigators in the previous 12-month period. 

Threshold freeze 

The standard IHT rate is currently 40%, paid on the value of any estate above £325,000; in addition, homeowners benefit from an extra £175,000 allowance if they pass on their primary residence to a child or grandchild. These thresholds, however, have been frozen until 2028, which inevitably means more people are likely to be dragged into the IHT net. In 2021-22, families collectively paid £6.1bn in death duties, up from £5.4bn the previous year, and monthly data up to December suggests the figure for 2022-23 will be even higher. 

Complex rules 

More than 13,000 individuals have been embroiled in IHT investigations since 2019. While some of these bereaved families may have acted deliberately, others are likely to have made innocent mistakes and simply fallen foul of IHT rule complexities. Two areas where mistakes commonly occur relate to the provision of lifetime gifts and the valuation of personal possessions. 

We’re here to help 

If you have any concerns or need advice on any aspect relating to IHT then do get in touch; we’re always happy to help. 

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.