News in Review

“Food sales picked up due to the Jubilee celebrations, but this was the only sector to report an increase”

Retail sales edged lower last month as people reduced their fuel consumption, while households continue to struggle with fast rising prices. According to the most recent Office for National Statistics (ONS) data released last Friday, retail sales volumes fell by a smaller-than-expected 0.1% in June; economists surveyed in a Reuters poll had widely expected a 0.3% monthly decline. This follows a fall of 0.8% in May.

In the 12 months to June, UK inflation leapt to 9.4% from 9.1% in May, with petrol prices soaring by 18.1p per litre in the month, according to ONS. Average petrol prices reached 184p per litre in June, the highest since records began in 1990 and up from 129.7p one year earlier, the largest monthly rise on record. The price of food continues to climb, with eggs, milk and cheese seeing the largest rises in June.

Headline retail statistics for June revealed:

  • Fuel sales volumes reduced by 4.3% with retailers indicating the decline was linked to record-high prices
  • Food sales volumes increased by 3.1% with retailers confirming that the rise was due to the Queen’s Platinum Jubilee celebrations
  • Online retail sales declined to 25.3%, its lowest proportion since March 2020 (22.8%), continuing a downward trend since February 2021 (37.4%) peak.

Deputy Director for Surveys and Economic Indicators at ONS, Heather Bovill, commented on the findings, “After taking account of rising prices, retail sales fell slightly in June and although they remain above their pre-pandemic level, the broader trend is one of decline.” She continued, “After a fall in May, food sales picked up due to the Jubilee celebrations, but this was the only sector to report an increase. Fuel sales fell back considerably with retailers reporting the record high prices at the pump hitting sales.”

Surge in sunscreen and ice cream sales

As the intense heat took hold last week, sales of sunscreen and ice cream soared according to data from Kantar. With the Met Office predicting extreme temperatures across much of the UK, households wisely stocked up on summer essentials to beat the heat. The last time the UK experienced a similar heatwave in July 2019, sales of fans, paddling pools and reusable water bottles shot up, 107%, 169% and 17% respectively, with almost £11m extra being spent during the hottest week on those three items. Fraser McKevitt Head of Retail and Consumer Insight at Kantar commented, “We expect to see similar if not even bigger numbers this time around,” but he did caution that price rises will lead people to be “feeling the pinch during our first restriction-free summer since 2019.”

ECB rate hike – more on the cards

Last week, the European Central Bank (ECB) raised its key interest rate by 50 basis points to 0.0%, with plans for further rises on the cards this year, as worries about inflation surpassed growth concerns. In justifying the decision to increase rates, Christine Lagarde ECB President commented, “Economic activity [in the eurozone] is slowing. Russia’s unjustified aggression towards Ukraine is an ongoing drag on growth. We expect inflation to remain undesirably high for some time owing to continued pressure from energy and food prices and pipeline pressures in the pricing chain.” The ECB has signalled that it will take a “meeting-by-meeting” approach to raising rates, but that further rate hikes “will be appropriate.”

Markets

Markets remained stable at the end of last week after the ECB raised interest rates for the first time since 2011. The FTSE 100 ended the week with its highest Friday close for six weeks. This week, European stock markets have been mixed on the news that Gazprom plans a drastic cut in gas deliveries to the bloc because of a turbine problem – the daily supply will be about 20% of the pipeline’s capacity. Wall Street kicked off the week on a promising note, having hit six-week highs last week. Weakness in the tech sector, was offset by an energy upturn, ahead of a Federal Reserve meeting later this week. After the IMF announced a cut in the UK’s 2022 GDP target, from 3.7% in April to 3.2%, the FTSE 100 ended Tuesday down just 0.02 points at 7,306.28. 

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 (27 July 2022)

Money – In the news

Returns trump ESG for two thirds of investors

Despite the growing trend towards Environmental, Social and Governance (ESG) investing, return on investment remains the ultimate priority for the majority of investors. Research1 has revealed that 66% of investors prioritise profit over humanitarian concerns. There are significant differences between the generations, however; just 28% of Baby Boomers said ESG was a factor when choosing investments, against 56% and 57% of younger Millennials and Gen Z investors, respectively.

‘Side hustling’ becomes the norm

Nearly half (46%) of people are supplementing their income with a ‘side hustle’, according to recent research2. The phrase, which originated in the United States, means taking on a part-time job in addition to one’s regular job in order to make more money. Of those who have a side hustle, over half (56%) first started it during the pandemic.

More Baby Boomers work past retirement age and provide financial support to family

Nearly 40% of Baby Boomers (i.e. the generation aged between 57 and 75) are set to continue working past the current State Pension age of 663. On average, this group plan to work for a further 4.3 years past their 66th birthday. The same study highlighted that just under a quarter (23%) of Boomers are financially supporting their children, with this intergenerational subsidisation also cascading to a second generation; 16% of Boomers are providing financial support to their grandchildren.

1Charles Schwab, 2022

2Airtasker, 2022

3Dunstan Thomas, 2022

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Wealth – In the news

Numbers of those exceeding pension Annual Allowance on the rise

In the past five years, the number of individuals whose yearly pension contributions breached the Annual Allowance (£40,000) has soared by more than 675%1. In the 2015-16 tax year, 5,460 people reported pension contributions exceeding the Annual Allowance in their self-assessment forms. For the 2019-20 tax year, the figure stood at 42,350. Meanwhile, the value of pension contributions breaching the Annual Allowance rose by 564% during the same period.

‘Screen sharing’ scams – beware

The Financial Conduct Authority’s2 (FCA’s) ScamSmart scheme has turned its attention to so-called ‘screen sharing’ scams, whereby fraudsters take over their victims’ computers using remote desktop software. Since July 2020, the FCA has seen well over 2,000 such cases, with victims losing a combined total of £25m between January 2021 and March 2022. One 59-year-old woman lost nearly £50,000 when a scammer posing as a financial adviser convinced her to download screen sharing software on the pretext of helping her complete a Bitcoin investment. Instead, they took advantage to access her banking details and other private information.

1House of Commons, 2022

2FCA, 2022

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

News in Review

“The economy rebounded in May with growth across all main sectors”

Data released from the Office for National Statistics (ONS) last week shows how the UK economy returned to growth in May, recording expansion of 0.5% during the month. After shrinking in April and March, the growth experienced in May was higher than the flat growth widely anticipated by economists polled by Reuters.

Encouragingly, ONS Director of Economic Statistics Darren Morgan said that “the economy rebounded in May with growth across all main sectors” including manufacturing, construction and travel, while health was a prime driver. The all-important service sector grew by 0.4% and human health and social work activities increased by 2.1%. Travel agencies fared well with demand for summer holidays really taking off and output in tour operation and travel agency industry surging by 11%.

Mr Morgan commented on the good news for manufacturing and construction, “There was widespread growth across manufacturing after several tough months, while construction also fared well with housebuilding and office refurbishment driving growth.” The UK’s monthly construction output rose by 1.5% on the month in volume terms in May 2022, the seventh consecutive month of growth.

Despite the economy’s more positive performance, wider expectations are for inflationary pressures to impact growth, especially with household incomes to be squeezed further heading into the autumn as energy prices continue their ascent.

Current Chancellor Nadhim Zahawi commented on the findings, “It’s always great to see the economy growing but I’m not complacent. I know people are concerned, so we are continuing to support families and economic growth.” He continued, “We’re working alongside the Bank of England to bear down on inflation and I am confident we can create a stronger economy for everyone across the UK.”


Next PM needs an economic plan

With the competition for the next Prime Minister really hotting up and the two final candidates to be announced today, business leaders have been airing their views on the requirement for the development of an economic plan to elevate the country from a low-growth environment. Representing 190,000 businesses, the Confederation of British Industry (CBI) wrote an open letter to candidates for the leadership of the Conservative Party, citing that they must develop ‘serious, credible and bold plans for growth’ in the face of some major challenges including ‘eye-watering’ inflation, supply chain disruptions and skills shortages. The letter outlined, ‘Sustainable economic growth must be at the heart of your manifestos. Without it, leadership ambitions cannot be met nor those of the British people and businesses.’

Inflation will normalise – “no ifs or buts”

In a speech last week, Bank of England (BoE) Governor Andrew Bailey said that “Bringing inflation back down to the 2% target sustainably is our job, no ifs or buts.” Although Bank Rate is on the rise, with further increases likely,it is expected thatlower interest rates will return once the effects of the pandemic and the war in Ukraine fade. Bailey added, “Cyclical adjustments in short-term nominal interest rates – like those we are currently witnessing in the United Kingdom and abroad – will for the foreseeable future continue to be played out against the backdrop of low global equilibrium real interest rates.” The BoE Governor told MPs last week that he still holds the view that inflation will fall sharply next year.

Markets

As the country grappled with the heatwave and sweltered in the hottest temperatures ever recorded, London stocks closed above the waterline on Tuesday as concerns over potential interest rate rises and inflation cooled, with the FTSE 100 ending the session up 1.01% at 7,296.28. The FTSE 250 ended up 1.41% at 19,282.59. European shares pushed higher on Tuesday following a Reuters report that Moscow would resume natural gas exports to Europe through the Nordstream 1 pipeline later this week, after having been halted for ten days of annual maintenance. Wall Street stocks also closed in positive territory on Tuesday, supported by updates from some of the nation’s biggest banks and suggestions from Federal Reserve officials that they were contemplating tempering their rate rising intentions.

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 (20 July 2022)

Investor sentiment and super trends

A new investor sentiment survey1 shows that, while investors are concerned about both the economic impact of the war in Ukraine and rising inflation, they remain confident about the stock market outlook and are not adjusting their portfolios just yet.

Two thirds of investors surveyed said they expect the ongoing conflict to result in higher energy prices, while 64% expect more global instability and 60% are concerned about increased cyber-attacks. In addition, 92% expect the war to increase inflation and more than half believe abnormally high inflation will last longer than 12 months.

Investors remain optimistic

The survey did, however, find that investors were not at the time looking to adjust their portfolios, although they are poised to do so should the market decline further. Commenting on the findings, Co-President of UBS Global Wealth Management Iqbal Khan said, “The long-term economic implications of the war in Ukraine are difficult to assess, but most investors remain optimistic on their outlook for the stock market and are confident in their well-diversified investment portfolios.”

Super trends – all change

Analysis2 by Credit Suisse has identified growing concerns over the economy as a key super trend, with economic anxieties now replacing the pandemic as the top worry for investors. The Swiss bank’s latest review of global themes driving investment over the long term suggests that, although COVID-19 ‘remains a worry for many people’, it now ranks below concerns about ‘poverty, social inequality and unemployment.’ Other super trends identified within the analysis include an infrastructure boom driven by government spending, technology with new catalysts like the metaverse providing impetus to this trend, the silver economy and climate change.

1UBS, 2022

2Credit Suisse, 2022

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Equity release product standard update

All equity release plans sold to new customers from 28 March 2022 must feature penalty-free partial loan repayments, enabling customers to reduce their loan size and save money on interest.

The new standard introduced by the Equity Release Council (ERC) could save customers millions of pounds. While ERC standards aren’t legally binding, almost 700 firms selling equity release products have promised to abide by them.

Other standards include the obligation to either offer fixed interest rates or capped variable rates, the right to remain in the property for life, and a ‘no negative equity guarantee.’

Chairman of the Equity Release Council David Burrowes spoke about the recent changes, “Updating our standards to lock down the ability to make partial repayments on lifetime mortgages – an innovative feature that has become increasingly common in recent years – provides flexibility for consumers and ensures the sector continues to evolve to meet changing demographic needs.”

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. Equity release may require a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration.

Keeping up to speed with 2022 property trends

The pandemic was a tumultuous time for us all – and the property market was not immune. As things begin to normalise, some pre-pandemic patterns are returning to property trends. 

Double speed 

Q1 2022 was the fifth busiest quarter since 2007, according to HM Revenue and Customs. Likewise, data1 analysis has found that UK properties are selling twice as fast as in 2019, with the average property now taking just 33 days to sell. 

Up and up and…? 

2021 was a record year for house prices and this soaring growth has continued in 2022. The numerous property price indices mostly concur that year-on-year growth in April 2022 was about 10%. After such frenzied activity, many experts now expect house price growth to slow for the remainder of the year. 

Supply, meet demand 

Part of the reason for slowing house price growth is likely to be increased supply. The number of new homes listed for sale has risen for the first time in a year, with +8% of respondents to a recent industry survey2 reporting an increase. Meanwhile, new buyer enquiries are at +9%, making this the closest supply has been to demand since the pandemic. 

Delayed FTBs 

With the war in Ukraine and soaring inflation, this is undoubtedly a challenging time for many. Indeed, seven in ten3 potential first-time buyers (FTBs) now expect to delay their plans to buy in the next two years because of the growing cost of living. 

Chain-free record 

Finally, 2022 is already setting new records; 73% of property buyers so far this year have been chain-free4. 

On the ball 

There’s plenty going on in the property market right now… and we’re keeping track of it all! Whatever your situation or plans, we can help you achieve your property aspirations. 

1Rightmove, 2022 

2RICS, 2022 

3Nationwide, 2022 

4Hamptons, 2022 

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

Purposeful wealth – understanding your ‘why’

Most people would agree that wealth is not about hoarding money but the financial freedom and flexibility it affords to help us achieve our passions and goals. Wealth essentially has the capacity to create a powerful purpose within our lives, provided we are able to unlock its true value. 

A good starting point for unlocking the value of wealth is to develop a clear understanding of what you want from life and what mark you want to leave. Do you want to travel; start your own business; support your family; create opportunities for others, or leave a legacy? Establishing the type of things that you really care about can provide a genuinely powerful purpose to wealth. 

Sharing your wealth 

One of the best ways to find fulfilment in your wealth is by sharing it; there is certainly no joy in holding onto wealth you will never use. Using wealth to help family, for instance, can be a particularly rewarding experience that allows you to positively change loved ones’ lives. 

Indeed, as the cost-of-living crisis continues to weigh heavily on household budgets, there has perhaps never been a better time to offer financial support to family members. 

Intergenerational planning 

A recent report1 shows that one in three advised families now share the same financial adviser, with many turning to them for help with wealth transfers and planning. As well as cost-of-living pressures, the increasing need for intergenerational advice has also been fuelled by the Chancellor’s decision to freeze Inheritance Tax (IHT) allowances until at least 2026, which will result in a growing number of people becoming liable for death duties. 

Unlocking the real value of your wealth  

We can help you develop a clear understanding of what you want to achieve with your wealth and then provide the support and advice required to fulfil those goals. 

1M&G, 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. 

Your retirement – you reap what you sow

Hindsight, they say, is a wonderful thing and that is certainly true for many retirees struggling financially. Diligent planning at the earliest opportunity, however, can make all the difference between enjoying a comfortable retirement and enduring a regretful one. 

Retirement regrets 

Research constantly shows that people typically leave retirement planning too late and regret not saving more across their working lives. For instance, a survey1 recently revealed one in five people expect to leave planning for their retirement until they are aged at least 60. Another study2 found almost half of over-50s regret not saving into a pension sooner, while nearly two thirds wished they had made larger contributions at an earlier stage. These findings vividly highlight the need for more people to take control and prioritise retirement planning earlier in their working lives. 

Pension blind spots 

Other research3 has revealed the cost of being kept in the dark on key pension details, with over three-quarters of people not knowing how much they pay in pension fees. Additionally, a third of pension holders are unaware of their pension’s risk profile, with a similar proportion invested in low-risk funds. This lack of awareness in relation to fees and investment choices is estimated to cost an average pension holder around £120,000 over their working life. 

Engagement gap 

The lack of engagement has led the Association of British Insurers and Pensions and Lifetime Savings Association to launch an industry campaign to boost people’s understanding of pensions. 

The campaign, which is due to run this autumn and winter, will aim to raise awareness of various pension-related issues so that more people can ultimately enjoy a better standard of living in retirement. 

Help at hand 

While current everyday financial pressures can make saving a difficult task, it is clearly imperative not to neglect your pension if you do want to avoid retirement regrets. We can help you take control to ensure you are able to enjoy the happy and fulfilling retirement you deserve. 

1Hargreaves Lansdown, 2022 

2Aviva, 2022 

3interactive investor, 2022 

The value of investments and income from them may go down. You may not get back the original amount invested. 

News in Review

“Getting the economy growing again has got to be the number one focus for all politicians”

Political news came thick and fast over the last week or so. Following Boris Johnson’s resignation last Thursday, a timetable for succession has now been announced by the 1922 Committee of backbench MPs, with potential contenders already jockeying for position as the race to replace the PM begins. The economy and the cost-of-living crisis are set to take centre stage in the leadership contest.

The field will have been narrowed down to two leadership contenders before MPs break up for the summer recess on 21 July and the final result of the ballot of Conservative members will be announced on 5 September. Mr Johnson will remain as Prime Minister in a caretaker capacity until the new leader is elected. In a meeting with his latest cabinet members last Thursday, Johnson said “major fiscal decisions” would be left for the next Prime Minister and the government “would not seek to implement new policies.” An economic speech scheduled to be delivered this week involving Mr Johnson and his Chancellor, at which they were due to set out their approach to rising living costs, has been shelved.

Director General of the Confederation of British Industry (CBI) Tony Danker commented on Boris Johnson’s departure, “We now need the political vacuum to be filled at speed to protect people’s living standards, through action on business confidence, investment and growth.” He continued, “Getting the economy growing again has got to be the number one focus for all politicians, and I look forward to working with the government on a plan for a better, brighter economic future for people right across the United Kingdom.”

Next leader faces fiscal challenges

Last week the Office for Budget Responsibility (OBR) cautioned challengers for the role of PM that they will find it challenging to cut taxes. The fiscal watchdog deduces that funding tax cuts through borrowing will pile pressure on public finances and risk fuelling inflation as Britain faces an unsustainable national debt burden unless future governments raise taxes to face increased costs. Keeping debt at pre-pandemic levels of around 75% of gross domestic product (GDP) would require finding an extra £37bn every decade for the next 50 years, raised either through tax increases or spending cuts. OBR says UK debt could hit 320% of GDP by the 2070s.

UK economic activity

Latest economic activity data from the Office for National Statistics (ONS) for the week to 1 July shows:

  • London saw the highest increase in online job adverts, an increase of 13% on the month
  • The number of online job adverts nationally rose by 5%, reaching 128% of February 2020’s total
  • Credit and debit card purchases rose by two percentage points, reaching 102% of the February 2020 average, three percentage points lower than in May 2022, but six higher than June 2021
  • 50% of trading businesses surveyed reported an increase in the prices of goods or services bought in June 2022, when compared with May
  • Seated diners in the UK rose by 12 percentage points, reaching 123% of the level seen in the equivalent week of 2019.

Markets

A combination of the introduction of some COVID restrictions in China and rising natural gas prices, weighed on markets at the start of this week, ahead of the release of a highly anticipated US consumer price index inflation report midweek. London stocks managed a positive finish on Tuesday, reversing earlier losses even as worries about a global slowdown continued to weigh on investors’ minds. The FTSE 100 ended the session up 0.18% at 7,209.86.

Former Japanese Prime Minster assassinated

World renowned for his hawkish foreign policy and a signature economic strategy that popularly came to be known as Abenomics, former Japanese Prime Minister Shinzo Abe was tragically gunned down last week whilst giving a speech in southern Japan. In office from 2006 to 2007 and from 2012 to 2020, Abe remains the country’s longest serving Prime Minister. Despite stepping down in 2020 due to ill health, he has remained one of the most influential political figures in contemporary Japan. The country spent the weekend in mourning.

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 (13 July 2022)