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)

In the driving seat

Many people have used the last couple of years to make positive life changes.

Three in five people have questioned what is important in life, while half feel their priorities have changed1. Two in five credit the pandemic with encouraging them to build more long-term savings. However, one in four now feel less comfortable about coping with unforeseen events than they did before the pandemic. Likewise, one in five feel less secure about their financial future, rising to one in four among the 35 to 44 age group.

Although 35 to 44 year-olds are the largest cohort to face disruption to their retirement plans, they are also the most likely to feel compelled to save more as a result of the pandemic (54%). While 14% of the same age group fear they may have to push back their retirement date, one in ten have been able to put extra money towards their retirement because of lockdown.

Life on hold

Meanwhile, more than half of UK adults have suspended or cancelled a planned life event during the pandemic. Of those affected, 16% put off starting a new job, 13% postponed a house purchase, 12% re-considered plans to start a new business, 10% stopped trying for a baby and 10% delayed a wedding.

Don’t get in a JAM

With 2022 hailed the ‘year of the squeeze,’ with outgoings increasing due to a higher energy price cap and National Insurance contributions, and real pay stagnating because of the effects of inflation, the number of households ‘just about managing’ (JAM) is set to grow. We can help you make informed choices about your money and build your financial confidence and resilience. However the pandemic has affected you, we can help refocus your goals, get your plans moving again – so you are well equipped to take control of your financial future.

1Aviva, Nov 2021

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.

Economic Review – June 2022

Slowdown fears mount

The latest gross domestic product (GDP) statistics show the UK economy unexpectedly shrank in April, increasing concerns about future growth prospects.

Data released by the Office for National Statistics (ONS) revealed that the economy shrank by 0.3% in April following a fall of 0.1% in March; this was the first contraction in two consecutive months since the start of the pandemic. April’s figure was also much weaker than analysts had been expecting, with the consensus forecast from a Reuters poll of economists predicting a growth rate of 0.1%. 

ONS said a key driver behind April’s decline was a ‘significant reduction in NHS Test and Trace activity.’ It also noted some ‘common themes’ reported by firms across different industries, with many saying increases in the cost of production and supply chain shortages had affected their business.

Commenting on the UK’s economic outlook the same day as the GDP figures were published, CBI Director General Tony Danker said the business group was “expecting the economy to be pretty much stagnant” and that “it won’t take much to tip us into a recession.”

More recent survey data from S&P Global’s closely watched Purchasing Managers’ Index also suggests the economy is showing signs of stalling. While the preliminary headline figure for June was unchanged at May’s 15-month low of 53.1, the index measuring new orders fell to 50.8, the weakest growth rate for over a year, with manufacturing order books dipping below the 50.0 growth threshold to 49.6.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said, “The economy is starting to look like it is running on empty. Current business growth is being supported by orders placed in prior months as companies report a near-stalling of demand. Business confidence has now slumped to a level which has in the past typically signalled an imminent recession.”

BoE ready to act ‘forcefully’

Last month saw the Bank of England (BoE) sanction another quarter-point increase in its benchmark interest rate as the Bank continues its efforts to contain the spiralling rate of inflation.

After its latest meeting held in mid-June, the BoE’s nine-member Monetary Policy Committee (MPC) voted by a 6-3 majority to raise Bank Rate from 1.0% to 1.25%. This was the fifth consecutive meeting at which the MPC had tightened monetary policy and pushed rates up to their highest level in 13 years.

For the second meeting in a row, the three dissenting voices each called for a half-point hike and the minutes to the meeting stressed that the BoE was ready to take ‘the actions necessary to return inflation to the 2% target.’ The minutes concluded, ‘The Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response.’ 

BoE Governor Andrew Bailey reinforced this message when speaking at a European Central Bank conference in late June. Mr Bailey said the Bank needed the option of half-point rate rises in order to address inflation and added “the key thing for us is to bring inflation back down to target and that is what we will do.”


When announcing last month’s rate rise, the BoE said it now expects inflation to peak ‘slightly above’ 11% in the autumn. A key driver of this anticipated rise will be higher household energy bills which look set to increase sharply in October as a result of Ofgem’s forthcoming price cap review.

The latest data released by ONS showed that inflation currently stands at a 40-year high. In the 12 months to May, the rate of inflation as measured by the Consumer Prices Index, rose to 9.1%, up slightly from April’s figure of 9.0%.

Markets (Data compiled by TOMD)

As Q2 drew to a close, growing concerns of a global economic downturn weighed on major indexes.

In the UK, the FTSE 100 closed the month on 7,169.28, a loss of 5.76%. The FTSE 250 and AIM also recorded monthly losses of 8.58% and 10.20% respectively. The Euro Stoxx 50 closed the month down 8.82% on 3,454.86, as major Eurozone markets prepare for the European Central Bank (ECB) to hike rates in the face of soaring inflation. The Japanese Nikkei 225 ended the month on 26,393.04, down 3.25%.

At the end of Q2, Wall Street declined on the back of weak US GDP figures. With the Federal Reserve also looking at aggressively tightening monetary policy to combat inflation, fears of a recession have heightened. A disappointing consumer confidence survey at the end of June also weighed on investor sentiment. The Dow closed the month down 6.71%, while the technology focused NASDAQ finished down 8.71%.

On the foreign exchanges, sterling closed the month at $1.21 against the US dollar. The euro closed at €1.15 against sterling and at $1.04 against the US dollar.

Brent Crude closed the month trading at around $109 a barrel, a loss of 7.55%, its first monthly decline since November, as signs emerge that the US economy is on a weaker footing than expected. At month end, the Organization of the Petroleum Exporting Countries and allies (OPEC+) approved an increase in supply for August. Gold is currently trading at around $1,817 a troy ounce, a loss of 2.02% on the month.

Real regular pay falling

The latest set of earnings statistics showed that basic pay continues to lag the rapidly rising cost of living with real regular wage levels falling at the fastest rate in more than a decade.

ONS figures released last month showed that average weekly earnings excluding bonuses rose at an annual rate of 4.2% across the February–April period, the same level reported in the previous month’s release. However, when adjusted for inflation, the latest data shows that basic pay packets actually shrank, with real regular earnings down by 2.2% in comparison to year earlier levels.

In contrast, growth in employees’ average total pay (which includes bonuses) across the latest three-month period slowed to 6.8%, down from a rate of 7.0% between January and March. Despite the fall, this measure of pay does still continue to outstrip price rises, with total pay growing by 0.4% in real terms across the February–April period.

Commenting on the data, ONS Head of Economic Statistics Sam Beckett said, “The high level of bonuses continues to cushion the effects of rising prices on total earnings for some workers, but if you exclude bonuses, pay in real terms is falling at its fastest rate in over a decade.”

Retailers report fall in sales

Official retail sales statistics show consumers have started to cut back on their shopping as the cost-of-living squeeze bites into household budgets.

The latest ONS data revealed that total retail sales volumes fell by 0.5% in May compared to April’s level. In addition, the previous estimate of sales growth in April was downgraded to 0.4% from an original figure of 1.4%, following a review of the seasonal adjustments process.

ONS said May’s fall had been driven by weaker food sales, with feedback from supermarkets suggesting consumers were spending less on their food shop due to the rising cost of living. In total, supermarket sales fell by 1.5% in May, while specialist shops such as butchers and bakers reported a 2.2% decline.

Other data also highlights the darkening consumer mood. GfK’s long-running Consumer Confidence Index, for instance, fell to -41 in June, a new record low for the second consecutive month, while the CBI’s Distributive Trades Survey points to continuing weakness in retail sales growth. The balance of retailers suggesting sales were poor for the time of year fell to -19 in June from zero in May, while the figure anticipating that sales this month will remain below seasonal norms was -25.

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

“The property market has continued to perform very well so far this year”

Despite a combination of economic and inflationary headwinds, homebuying demand remained strong during Q2 according to the most recent Homebuyer Hotspot’s Demand Index from GetAgent.

In the second quarter of the year, buyer demand – based on the stock listed as sold, as a percentage of all stock listed for sale – was 63%, down just 1% on the previous quarter. The data showed that although London remains a cooler spot for buyer demand in the property market (48%), along with the City of London (25%), there are signs that momentum is beginning to build. Colby Short, Chief Executive Officer at GetAgent, commented on the Q2 Index findings, “While the London property market has been decidedly more muted of late when compared to the rest of the UK, we’re now seeing almost half of all homes listed for sale being snapped up which suggests that the capital is far from on its knees.”

Homebuyer hot spots in the UK include Bristol, where buyer demand sits at 78%, followed by Northamptonshire (72%), Bath and North East Somerset, Wiltshire, Gloucestershire, and Hampshire (70%). Mr Short deduced, “Despite wider economic turbulence, the property market has continued to perform very well so far this year and house prices remain at all-time highs due to the imbalance between homebuyer demand and available stock.” He continued, “In fact, demand levels remain extremely high across the majority of the market, and it seems that not even the threat of increasing interest rates and record levels of inflation can deter the nation’s homebuyers from their aspirations of homeownership.”

Turbulent Tuesday for PM

Tuesday was a challenging day for Boris Johnson as he addressed claims that he had been told in person about a past formal complaint concerning shamed Member of Parliament Chris Pincher. The government was thrown into turmoil, as Chancellor Rishi Sunak and Health Secretary Sajid Javid resigned within minutes of each other, rebuking the Prime Minister for a lack of competence and integrity. Nadhim Zahawi and Steve Barclay have since been appointed to the roles of Chancellor and Health Secretary respectively.

ECB poised to implement rate hike

During the European Central Bank’s (ECB) annual retreat in Portugal last week, President Christine Lagarde affirmed plans for an initial quarter-point interest rate increase in July and reiterated that policy makers are ready to step up action to tackle record inflation if necessary. She cautioned that inflation in the eurozone was “undesirably high,” pledging to act in “a determined and sustained manner” to get it back under control. Lagarde suggested that following the July rise, rates would then increase by 0.5 percentage points in September unless there was a marked improvement in the outlook. Inflation in the eurozone is currently running at a record high of 8.1%.

Meanwhile, Governor of the Bank of England Andrew Bailey warned that the UK faces a rapid, steep downturn as households are plagued by a “very large national real income shock.” Also speaking at the conference in Portugal, Bailey signposted that the UK economy is at a “turning point,” addressing potentially bigger hikes in interest rates to alleviate price pressures, he vowed to act “more forcefully” if ultra-high inflation continues as anticipated.

Chinese economy returns to growth

After lockdown restrictions were eased in the world’s second-largest economy, Chinese economic activity expanded in June following three consecutive months of contraction, according to official business and factory surveys, which indicated a modest recovery. Demand remains weak and some manufacturers are contending with tight profit margins.

ESG ratings regs supported by FCA

The Financial Conduct Authority (FCA) has welcomed the government bringing in oversight of environmental, social and governance (ESG) services and products, following industry consultation. The FCA said this would satisfy its primary objective to protect consumers and the integrity of the UK financial system. Director of ESG at the FCA, Sacha Sadan, said the focus of the regulator’s ESG strategy is to build trust and integrity in financial instruments and products that are sold as sustainable and “that requires close international co-operation on standards and actions right across the market, [so] we would support a future regulatory regime in line with international recommendations.” The Treasury and the FCA will embark on an industry-wide consultation prior to implementing regulations.

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.