The Growth Plan 2022… and the countdown is on

Chancellor Kwasi Kwarteng announced a series of tax cuts and measures on 23 September intended to boost economic activity. At the core of his ambitious Growth Plan were three key priorities: reforming the supply-side of the economy, maintaining a responsible approach to public finances and cutting taxes to boost growth.

Pledging a raft of changes to taxation, key personal tax announcements included:

  • A reversal of last April’s National Insurance contribution rise was confirmed by the government on 22 September. The 1.25 percentage point increase will be reversed from 6 November. The planned Health and Social Care Levy, due to replace the National Insurance rise as a new standalone tax from April 2023, has also been cancelled
  • A reduction in Stamp Duty Land Tax (SDLT) in England and Northern Ireland, raising the residential nil-rate threshold from £125,000 to £250,000, with immediate effect, and First Time Buyers Relief from £300,000 to £425,000. He also increased the maximum amount that an individual can pay for a home while remaining eligible for First Time Buyers’ Relief, from £500,000 to £625,000. As SDLT is devolved in Scotland and Wales, the Scottish and Welsh Governments will receive funding through an agreed fiscal framework to allocate as they see fit
  • A cut to the basic rate of Income Tax to 19% in April 2023 – one year earlier than previously planned. At present, people in England, Wales and Northern Ireland pay 20% on annual earnings between £12,571 and £50,270; different rates apply in Scotland. The highest rate of Income Tax (the ‘additional rate’ paid at 45% by those earning over £150,000) will be abolished. From April 2023 there will be a single higher rate of Income Tax of 40%
  • Reversing the 1.25 percentage point increase in Dividend Tax rates applying UK-wide from 6 April 2023, so the ordinary and upper rates of Dividend Tax will revert to 7.5% and 32.5% respectively.

Tax year midpoint – planning pays

At the midpoint in the 2022-23 tax year, and especially in light of the recent changes, now is an ideal time to revisit your finances, rather than leaving it late and reviewing your tax affairs in 2023. Tax planning involves taking sensible steps to reduce the amount of tax you pay. Working with us can help you put in place plans for your future to safeguard your wealth. Get in touch with any questions you may have.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning.

Economic Review – September 2022

Chancellor’s Growth Plan

In his first fiscal statement since becoming Chancellor, Kwasi Kwarteng hailed a “new approach for a new era” as he unveiled a series of tax cuts and other measures designed to spur economic growth.

During a ‘mini-budget’ delivered on 23 September, the Chancellor outlined a Growth Plan centred on the biggest package of tax cuts in fifty years. As well as reversing April’s National Insurance rise and the planned increase in Corporation Tax, Mr Kwarteng also announced Income Tax and Stamp Duty cuts with the total cost of the package estimated to be almost £45bn by 2027. On 3 October, the Chancellor announced a U-turn on plans to scrap the 45p rate of Income Tax.

These plans are set to be funded via a large increase in borrowing, with Treasury estimates suggesting an additional £72bn of government borrowing as a result of the Chancellor’s announcement. Paul Johnson, Director of the independent Institute for Fiscal Studies, described the plans as a “big gamble” and sterling came under intense pressure after the statement as financial markets gave their verdict on Mr Kwarteng’s Growth Plan.

In an unusual intervention, the International Monetary Fund (IMF) also openly criticised the Chancellor’s proposals, warning that ‘large and untargeted fiscal packages’ were not recommended at a time of ‘elevated inflation pressures.’ The IMF, which works to stabilise the global economy, said it was ‘closely monitoring’ developments in the UK and urged the government to ‘re-evaluate’ its policies in the coming weeks.

Despite the criticism and market turmoil, the government had insisted the tax cuts outlined in the Growth Plan are the ‘right plan.’ The Treasury has also now announced a date when the Chancellor will set out details of his Medium-Term Fiscal Plan. Mr Kwarteng will deliver his next fiscal statement on 23 November and this time it will be accompanied by growth and borrowing forecasts produced by the Office for Budget Responsibility (OBR).

Bank under rate hike pressure

Despite increasing its benchmark interest rate for the seventh meeting in a row, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) remains under intense pressure to further raise rates.

At its latest meeting, the MPC voted by a 5-4 majority to hike the Bank Rate by 0.5 percentage points to 2.25%. Among the dissenting voices, three were in favour of raising rates by a larger amount of 0.75 percentage points, while the other would have preferred a smaller quarter-point rise.

When announcing its decision on 22 September, the MPC once again expressed a readiness to implement further rate rises as required. Specifically, the minutes to the meeting stated that, ‘Should the outlook suggest more persistent inflationary pressures, including from stronger demand, the Committee will respond forcefully, as necessary.’

The MPC’s next policy announcement is scheduled for 3 November, but some analysts have warned the Bank may need to act sooner following the sharp decline in the value of sterling in the aftermath of the Growth Plan. On 26 September, the BoE responded to this speculation by saying it ‘will not hesitate’ to raise interest rates if needed and that it was monitoring markets ‘very closely.’

Speaking at the International Monetary Policy Forum the following day, the Bank’s Chief Economist Huw Pill reiterated this position. Mr Pill said he had concluded that “the combination of fiscal announcements that we’ve seen will act as a stimulus” before adding that this will require “a significant monetary policy response.”

The Bank is clearly under intense pressure to act decisively, either before or following the MPC’s next scheduled meeting. Money markets have already fully priced in a one percentage point increase in the Bank Rate to 3.25% at the November meeting and analysts have suggested rates could potentially hit 5.5% or even higher by next spring.

Markets (Data compiled by TOMD)

September was a challenging month for global stock markets, which largely closed the month in negative territory as global recessionary fears intensified.

In the UK, the Prime Minister and Chancellor met with the OBR on 30 September, in a move widely seen as an attempt to reassure financial markets following a challenging week, which saw an abrupt policy shift by the BoE to restart bond purchases.

Positive data released by the Office for National Statistics (ONS) on the last day of the month showed UK economic output increased by 0.2% in Q2, revised up from a previous reading of -0.1%. European markets responded positively on the last day of Q3. The FTSE 100 edged up by 12.22 points on the final day of trading to 6,893.81, the blue-chip index closed the month down over 5%. The midcap-focused FTSE 250 and the AIM registered losses of 9.94% and 8.65% respectively in September. The Euro Stoxx 50 closed the month down 5.66%.

US stocks recorded another week of losses in a downbeat end to the month and quarter. The Dow closed the month down 8.84% on 28,725.51. The tech-heavy Nasdaq closed September on 10,575.62, down 10.50%. In Japan, the Nikkei 225 closed September on 25,937.21, down 7.67%.

On 30 September, sterling managed a rebound, edging back up to the levels seen before the Chancellor unveiled his Growth Plan.

On the foreign exchanges, the euro closed at €1.13 against sterling. The US dollar closed the month at $1.11 against sterling and at $0.97 against the euro.

Brent Crude closed the month trading at around $85 a barrel, a drop of 10.16%, as recessionary concerns weigh, and the impact on demand is considered. Gold is currently trading at around $1,670 a troy ounce, a loss of 2.57% on the month.

UK inflation dips slightly

While the latest official figures did report a small decline in consumer price growth and the government’s energy price cap is set to reduce the anticipated peak, economists still believe inflation could be relatively slow to fall back from current elevated levels.

Data released last month by ONS revealed that UK consumer price inflation eased for the first time in almost a year. A decline in petrol and diesel prices saw the headline rate dip to 9.9% in August, down from 10.1% in the previous month.

The government’s decision to introduce its Energy Price Guarantee has also limited the impact of October’s rise in household energy bills. The decision means typical bills will now rise by around 25% rather than 80% and, as a result, will thereby reduce the anticipated peak in the rate of inflation.

According to updated forecasts released by the BoE, inflation is now expected to reach a high of just under 11% in October, significantly below the 13% figure predicted prior to the energy price cap announcement. However, the Bank also said it then expects inflation to remain above 10% ‘over the following few months’ before it starts to fall back.

Signs that jobs boom is fading

Although the latest set of employment statistics did reveal that unemployment fell to its lowest level since 1974, experts have warned that the UK labour market might be starting to turn.

Figures released last month by ONS showed that the unemployment rate across the May–July period dropped to 3.6%, a 0.2 percentage point decrease compared to February–April’s figure. The data, however, also showed that the decline was mostly due to a fall in the size of the workforce, with the number of people no longer looking for work hitting a five-year high. 

The latest update also revealed a fall in both the employment rate and job vacancies. The employment rate in the three months to July slipped to 75.4%, 0.2 percentage points lower than in the previous three-month period, while the total number of job vacancies, although still historically high, fell by 34,000 during the June–August period, the largest decline in two years.

Survey evidence released last month by the Recruitment and Employment Confederation (REC) also highlighted a slowdown in hiring, reflecting greater economic uncertainty, rising costs and candidate shortages. Commenting on the findings, REC Chief Executive Neil Carberry suggested “the post-pandemic jobs rush is now abating.”

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

News in Review

“Our entire focus is on making Britain more globally competitive”

Last Friday, Kwasi Kwarteng outlined a series of tax cuts and measures aimed at boosting economic activity. HisGrowth Plan was built around three key priorities: reforming the supply-side of the economy, maintaining a responsible approach to public finances and cutting taxes to boost growth, he pledged, “Our entire focus is on making Britain more globally competitive… We promised to prioritise growth. We promised a new approach for a new era. We promised to release the enormous potential of this country.”

Key tax announcements included:

  • A reversal of last April’s National Insurance contribution rise was confirmed by the government. The 1.25 percentage point increase will be reversed from 6 November. The planned Health and Social Care Levy, due to replace the National Insurance rise as a new standalone tax from April 2023, has also been cancelled
  • A reduction in Stamp Duty Land Tax (SDLT) in England and Northern Ireland, raising the residential nil-rate threshold from £125,000 to £250,000, with immediate effect, and First Time Buyers Relief from £300,000 to £425,000. He also increased the maximum amount that an individual can pay for a home while remaining eligible for First Time Buyers’ Relief, from £500,000 to £625,000. As SDLT is devolved in Scotland and Wales, the Scottish and Welsh Governments will receive funding through an agreed fiscal framework to allocate as they see fit
  • A cut in the basic rate of Income Tax to 19% in April 2023 – one year earlier than previously planned. At present, people in England, Wales and Northern Ireland pay 20% on annual earnings between £12,571 and £50,270; different rates apply in Scotland. The highest rate of Income Tax (the ‘additional rate’ paid at 45% by those earning over £150,000) will be abolished. From April 2023 there will be a single higher rate of Income Tax of 40%
  • A reversal of the 1.25 percentage point increase in Dividend Tax rates applying UK-wide from 6 April 2023, so the ordinary and upper rates of Dividend Tax will revert to 7.5% and 32.5% respectively.

UK markets and sterling have fallen following the announcement as investor concerns intensify at the prospect of a surge in government borrowing in order to fund the tax cuts. Sterling plunged to historic lows forcing the Chancellor and the Bank of England to reassure markets.

Energy Bill Relief Scheme

Last Wednesday the Department for Business, Energy and Industrial Strategy announced its new Energy Bill Relief Scheme which outlines its plans to reduce energy bills for all non-domestic customers, including all UK businesses, the voluntary sector such as charities and public sector organisations including schools and hospitals in Great Britain and Northern Ireland. The support package fixes electricity and wholesale gas prices for firms for six months from 1 October and will be automatically applied to appropriate businesses, potentially reducing energy costs by more than 50% this winter. The level of price reduction will vary depending on the contract type and circumstances of the business or organisation.

Rates on the rise

The Bank of England raised Bank Rate by half a percentage point on Thursday from 1.75% to 2.25%, taking it to its highest level since 2008. Five members of the Monetary Policy Committee (MPC) voted for the 0.5% rise, while three members favoured a 0.75% increase, the remaining member preferred a 0.25% elevation. In the minutes of the September meeting, the expectation is that due to the Energy Price Guarantee, unveiled by Liz Truss earlier in the month, ‘Uncertainty around the outlook for UK retail energy prices has nevertheless fallen, following the government’s announcements of support measures… the peak in measured CPI inflation is now likely to be lower than projected in the August Report, at just under 11% in October. Nevertheless, energy bills will still go up and, combined with the indirect effects of higher energy costs, inflation is expected to remain above 10% over the following few months, before starting to fall back.’

At the Federal Reserve’s most recent meeting on 21 September, the US central bank pushed interest rates to their highest level in almost 15 years, raising its key rate by another 0.75 percentage points, lifting the target range to 3% to 3.25%. Fed Chairman Jerome Powell said the rate rises were necessary to avoid long-term economic damage, but conceded that they will take a toll, “We have got to get inflation behind us… I wish there were a painless way to do that. There isn’t.”

Here to help

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

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

All details are correct at time of writing (28 September 2022)

The Growth Plan 2022

“We need a new approach for a new era”

A day after Bank Rate rose from 1.75% to 2.25%, Chancellor Kwasi Kwarteng delivered his first statement on 23 September, outlining a series of tax cuts and measures aimed at boosting economic activity and growth.

Moving straight to the pressing matter of energy costs, Mr Kwarteng reiterated steps taken to support families and businesses, including the Energy Price Guarantee, the Energy Bill Relief Scheme and the Energy Markets Financing Scheme.

With a keen growth focus, the Chancellor professed, “We need a new approach for a new era,” before announcing a Growth Plan built around three key priorities: reforming the supply-side of the economy, maintaining a responsible approach to public finances and cutting taxes to boost growth. A ‘Medium-Term Fiscal Plan’ will be outlined in the coming months and the Office for Budget Responsibility (OBR) will be publishing an economic and fiscal forecast before the end of 2022. In the meantime, the government has set a target of reaching a 2.5% trend growth rate for the UK economy, with a tax simplification theme front and centre. The key announcements were:

National Insurance

A reversal of last April’s National Insurance contribution rise was confirmed by the government on 22 September. The 1.25 percentage point increase will be reversed from 6 November. The planned Health and Social Care Levy, due to replace the National Insurance rise as a new standalone tax from April 2023, has also been cancelled.

Stamp Duty Land Tax (SDLT)

The Chancellor announced a reduction in SDLT in England and Northern Ireland, raising the residential nil-rate threshold from £125,000 to £250,000, with immediate effect, and First Time Buyers’ Relief from £300,000 to £425,000. He also increased the maximum amount that an individual can pay for a home, while remaining eligible for First Time Buyers’ Relief, from £500,000 to £625,000. As SDLT is devolved in Scotland and Wales, the Scottish and Welsh Governments will receive funding through an agreed fiscal framework to allocate as they see fit.

Income Tax

The basic rate of Income Tax will be cut to 19% in April 2023 – one year earlier than previously planned. At present, people in England, Wales and Northern Ireland pay 20% on annual earnings between £12,571 and £50,270; different rates apply in Scotland. The highest rate of Income Tax (the ‘additional rate’ paid at 45% by those earning over £150,000) will be abolished. From April 2023 there will be a single higher rate of Income Tax of 40%.

Dividend Tax

The government is reversing the 1.25 percentage point increase in Dividend Tax rates applying UK-wide from 6 April 2023, so the ordinary and upper rates of Dividend Tax will revert to 7.5% and 32.5% respectively.

Business measures

  • The planned rise in Corporation Tax to 25% in 2023 will not go ahead; the rate will remain at 19%
  • The Annual Investment Allowance, which is the amount that companies can invest tax free, will be made permanent and remain at £1m
  • The IR35 rule reforms which govern off-payroll working will be repealed from 6 April 2023
  • The government intends to establish new Investment Zones in 38 areas in England, providing businesses with tax incentives and reduced regulation, such as fast-tracked planning applications, to drive growth and encourage investment. There are plans to expand investment zones across Scotland, Wales and Northern Ireland
  • The cap on bankers’ bonuses has been lifted
  • Increasing the generosity and availability of the Seed Enterprise Investment Scheme (SEIS) and Company Share Option Plan (CSOP) from April 2023.

Other announcements included

  • Bringing forward reform of the pensions regulatory charge cap
  • Alcohol duty rates will be frozen from 1 February 2023
  • Plans to reform the infrastructure planning system and to prioritise 138 key projects
  • Universal Credit rules will be tightened, leading to a reduction in benefits if people don’t fulfil job search commitments
  • VAT-free shopping scheme to be introduced for overseas visitors – currently in consultation
  • Tightening union legislation, implementing Minimum Service Levels for transport services and forcing unions to put pay offers to a vote by their members.

As he left the dispatch box the Chancellor concluded, “Our entire focus is on making Britain more globally competitive… We promised to prioritise growth. We promised a new approach for a new era. We promised to release the enormous potential of this country. Our Growth Plan has delivered all those promises and more. And I commend it 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 HMRC rules 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 the individual circumstances of the investor.

All details are correct at the time of writing (23 September 2022)

Commercial Property Review – September 2022

Strong monthly transactions but slowing activity ahead 

Latest data from the UK housing market presents a mixed picture, with dwindling demand and limited supply contrasting markedly with strong transaction figures. 

Homebuyer demand remains above average, Zoopla pointed out. Yet analysts expect demand to weaken in coming months as more households feel the cost-of-living squeeze, a prediction supported by the latest Royal Institution of Chartered Surveyors (RICS) survey, which showed new buyer enquiries still in negative territory. The RICS survey also noted that new instructions to sell homes remained largely flat, which is keeping supply limited. 

Completed transactions, in contrast, remained strong in July, 6% above the 2018-19 average for the month, according to HM Revenue and Customs. Despite this, there are already signs of slowing activity ahead, with mortgage approvals 9% below the 2018-19 average for the month, according to the Bank of England. 

Help to Buy ends 

First-time buyers (FTBs) have only a month left to take advantage of the Help to Buy: Equity Loan scheme, which will stop accepting new applications at the end of October 2022. 

The government’s flagship initiative, which was always intended to be temporary, will close completely in March 2023. First launched in 2013, it has so far helped at least 350,000 FTBs onto the property ladder. 

Help to Buy enables FTBs to purchase a new build property with just a 5% deposit. When the initiative wraps up, however, there will still be several government schemes offering help to FTBs and other buyers. Those with only a 5% deposit will be able to use the mortgage guarantee scheme to borrow the other 95%. 

Shared Ownership, meanwhile, allows people to buy a share in a property and pay rent on the rest. FTBs are also eligible to save into a Lifetime ISA, which adds a government bonus of 25% onto annual house deposit savings of up to £4,000. 

Greening homes “a monumental but essential task” 

Scotland’s first-ever Green Home Festival, organised by members of the Construction Industry Collective Voice (CICV) as part of the Edinburgh Festival Fringe, took place in August to raise awareness of the role of property in the transition to net zero. 

The week-long series of events delivered practical advice on topics ranging from using sustainable materials to protecting homes against floods. The festival aimed to engage individuals and businesses to reduce their carbon footprint and become more energy efficient. 

Patrick Harvie, Minister for Zero Carbon Buildings, Active Travel and Tenants’ Rights, was the keynote speaker. In his speech he said, “Our statutory target for 2030 means that we need to reduce emissions from heating buildings by 68% below their level in 2020. This is a monumental but essential task. Our building stock is relatively old and wasn’t always built to high energy standards. This legacy of poor energy efficiency has contributed to emissions and fuel poverty, so we need to start drastically improving that standard.” 

All details are correct at the time of writing (20 September 2022) 

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. 

Residential Property Review – September 2022

Strong monthly transactions but slowing activity ahead 

Latest data from the UK housing market presents a mixed picture, with dwindling demand and limited supply contrasting markedly with strong transaction figures. 

Homebuyer demand remains above average, Zoopla pointed out. Yet analysts expect demand to weaken in coming months as more households feel the cost-of-living squeeze, a prediction supported by the latest Royal Institution of Chartered Surveyors (RICS) survey, which showed new buyer enquiries still in negative territory. The RICS survey also noted that new instructions to sell homes remained largely flat, which is keeping supply limited. 

Completed transactions, in contrast, remained strong in July, 6% above the 2018-19 average for the month, according to HM Revenue and Customs. Despite this, there are already signs of slowing activity ahead, with mortgage approvals 9% below the 2018-19 average for the month, according to the Bank of England. 

Help to Buy ends 

First-time buyers (FTBs) have only a month left to take advantage of the Help to Buy: Equity Loan scheme, which will stop accepting new applications at the end of October 2022. 

The government’s flagship initiative, which was always intended to be temporary, will close completely in March 2023. First launched in 2013, it has so far helped at least 350,000 FTBs onto the property ladder. 

Help to Buy enables FTBs to purchase a new build property with just a 5% deposit. When the initiative wraps up, however, there will still be several government schemes offering help to FTBs and other buyers. Those with only a 5% deposit will be able to use the mortgage guarantee scheme to borrow the other 95%. 

Shared Ownership, meanwhile, allows people to buy a share in a property and pay rent on the rest. FTBs are also eligible to save into a Lifetime ISA, which adds a government bonus of 25% onto annual house deposit savings of up to £4,000. 

Greening homes “a monumental but essential task” 

Scotland’s first-ever Green Home Festival, organised by members of the Construction Industry Collective Voice (CICV) as part of the Edinburgh Festival Fringe, took place in August to raise awareness of the role of property in the transition to net zero. 

The week-long series of events delivered practical advice on topics ranging from using sustainable materials to protecting homes against floods. The festival aimed to engage individuals and businesses to reduce their carbon footprint and become more energy efficient. 

Patrick Harvie, Minister for Zero Carbon Buildings, Active Travel and Tenants’ Rights, was the keynote speaker. In his speech he said, “Our statutory target for 2030 means that we need to reduce emissions from heating buildings by 68% below their level in 2020. This is a monumental but essential task. Our building stock is relatively old and wasn’t always built to high energy standards. This legacy of poor energy efficiency has contributed to emissions and fuel poverty, so we need to start drastically improving that standard.” 

All details are correct at the time of writing (20 September 2022) 

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

News in Review

“With admiration we recall her lifelong sense of duty and dedication to her people“

The nation ground to a halt on Monday to observe a Bank Holiday for Her Majesty Queen Elizabeth II’s state funeral, rounding off an emotive period of mourning.

Attended by world leaders, foreign royal families, heads of state, foreign dignitaries and representatives from across the Commonwealth, opening the service at Westminster Abbey, the Dean of Westminster delivered the bidding, “We gather from across the nation, from the Commonwealth, and from the nations of the world, to mourn our loss, to remember her long life of selfless service… With gratitude we remember her unswerving commitment… With admiration we recall her lifelong sense of duty and dedication to her people.“

Members of The Royal Family, royal household staff and representatives, remain in mourning until 26 September, seven days after the funeral.

Inflation rate moderates

The Consumer Price Index (CPI) fell to 9.9% in the 12 months to August 2022, down from 10.1% July, according to the Office for National Statistics (ONS). Lower petrol prices were the main reason the pace of inflation eased slightly in August. Food prices continued to rise in the month, partially offsetting the fall in fuel prices. Although the rate was not as high as many economists had expected in August, there are warnings that CPI is likely to rise again later in 2022.

The data also outlined that average wages, excluding bonuses, increased by 5.2% in the three months to July 2022, but with inflation taken into account, the real value of that pay fell by 2.8%.

With the same cost issues impacting countries worldwide, ONS has said that UK inflation is similar to the European Union average at present.

It is widely expected that the Bank of England will raise Bank Rate on Thursday by another 50 basis points, although it may opt for an even bigger move, a Reuters poll of economists found.

World Bank warning

Last Thursday, the World Bank issued a press release warning of the risks of a global recession, with the Bank cautioning that leading central banks risk sending the global economy into a ‘devastating’ recession next year if policymakers raise interest rates too high over the months ahead and stress financial markets. The Washington-based organisation called on monetary authorities in leading economies to co-ordinate their actions to reduce the overall amount of tightening.

World Bank Group President David Malpass commented, “Global growth is slowing sharply, with further slowing likely as more countries fall into recession. My deep concern is that these trends will persist, with long-lasting consequences that are devastating for people in emerging market and developing economies.” He continued, “To achieve low inflation rates, currency stability and faster growth, policymakers could shift their focus from reducing consumption to boosting production. Policies should seek to generate additional investment and improve productivity and capital allocation, which are critical for growth and poverty reduction.”

UK fiscal event

The new Chancellor Kwasi Kwarteng will be making a fiscal statement on Friday 23 September. The government is expected to set out the estimated cost of plans to cap energy prices, as well detailing tax cuts pledged by Prime Minister Liz Truss in a bid to boost the economy.

Retail sales – ‘consumers are cutting back’

New data from ONS shows that retail sales volumes decreased by 1.6% in August, a continuation of the downward trend which started in summer 2021. Sales across all retail sectors, including food, online, non-food, and fuel, reduced as households cut back in the face of rising prices. The volume reduction in August was the largest month-on-month decline since December last year. Although supermarket sales volumes also fell by 0.9% in the month, tobacco and sales registered a 6.3% increase. In addition, department stores saw a large 2.7% drop in sales volumes, while sales in clothing shops fell by 0.6%. ONS noted, ‘Feedback from retailers suggests that consumers are cutting back on spending because of increased prices and affordability concerns.’

Here to help

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

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

All details are correct at time of writing (21 September 2022)

Your protection needs

We all know financial commitments are a fact of life. Mortgage repayments and household bills aren’t glamorous expenses, but they are unavoidable in spending our hard-earned cash. Protection insurance too should be seen as a certainty in your financial plans.

With living expenses rising considerably, many people are having to tighten their spending reins. Cutting back on protection, however, is not like spending less in the shops. With the right protection, you are paying for peace of mind in the knowledge that you and your loved ones should not suffer severe financial hardship due to any setback covered by your policy. It’s important to know that protection policies can cater to all budgets, so we can find a policy with an affordable premium.

In turbulent economic times, protection is more important than ever.

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

Mortgages for over-65s – mission possible!

Are you over sixty-five and finding it challenging to get a mortgage? You’re certainly not alone, according to recent findings1. 

With the number of people in the UK aged over 65 soon expected to surpass those aged 18 and under, just 37% of potential borrowers aged 65 and over are offered the size of loan requested, compared with 75% of younger borrowers; despite the average loan request being much lower for older borrowers (£100,000 for older borrowers versus £216,750 for those aged under 65 – March 2022). 

Lenders are looking for evidence that you will be able to make the repayments for the entire term of your mortgage. It’s also important to be able to demonstrate that you’re a responsible borrower with a stable income. Getting a mortgage as an older borrower is not mission impossible; whatever your circumstances, we can help. 

1MBT Affordability Index, 2022 

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

The ‘Big Five’ personality traits of the self-made millionaire

In the first study of its kind1, researchers have distinguished the personality traits most common among self-made millionaires versus those who have inherited their wealth. 

The study analysed a sample of wealthy individuals according to the so-called ‘Big Five’ personality traits:  

• Openness (i.e. curious vs cautious)  

• Conscientiousness (i.e. efficient vs disorganised)  

• Extroversion (i.e. outgoing vs reserved)  

• Agreeableness (i.e. friendly vs uncaring)  

• Neuroticism (i.e. confident vs anxious)  

The results showed that wealthy individuals across both categories tended to show a similar personality profile, being open to new experiences, extroverted, conscientious, agreeable and demonstrating low levels of neuroticism. They were also shown to be more risk tolerant than the average population.  

Interestingly, the study revealed that self-made millionaires more closely match this personality profile than inheritors – and that this becomes more pronounced the wealthier they are.  

The report concluded that people with this unique combination of personality traits have a higher chance of becoming rich via their own means. The good news – if you don’t match this specific profile – over the years many studies have also shown that taking financial advice can result in heightened wealth accumulation.  

1Humanities & Social Sciences Communications, 2022  

The value of investments and income from them may go down. You may not get back the original amount invested. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.