News in Review

“GDP grew robustly across the fourth quarter as a whole”

With the dust settling on the recent rise in Bank Rate and an increase in springtime inflation expectations, some positive news was released at the tail end of last week in the form of Q4 GDP data. The official statistics from the Office for National Statistics (ONS) show that GDP increased by an estimated 7.5% in 2021, following a 9.4% fall in 2020. Despite a fall back in December due to Omicron related restrictions, this was the fastest pace of growth in over 80 years.

The estimate exceeded analysts’ expectations which averaged 7.3% for Q4. However, ONS was keen to emphasise that owing to the challenges faced making estimates in the current conditions, their GDP estimate for Q4 is subject to more uncertainty than usual. Director of Economic Statistics at ONS Darren Morgan commented on the dataset, “GDP fell back slightly in December as the Omicron wave hit, with retail and hospitality seeing the biggest impacts. However, these were partially offset by increases in the Test and Trace service and vaccination programmes. Despite December’s setback, GDP grew robustly across the fourth quarter as a whole, with the NHS, couriers and employment agencies all helping to support the economy.”

The data meant the UK posted the fastest growth in the G7, beating growth in the US, which came in at 5.7%, France and Germany at 7% and 2.7% respectively, and Italy at 6.5%.

BCC plea for support

The results of a business survey recently conducted by the British Chambers of Commerce (BCC) make compelling reading, with UK firms expressing concerns over an array of cost pressures – just as households are feeling the squeeze, so too are businesses.

The key headline stats from the survey identify that almost three quarters (73%) of firms are increasing prices in response to rising costs and 62% pinpoint higher energy bills as a primary factor (rising to 75% for manufacturers). Meanwhile, almost two thirds (63%) cite increased wage bills as a key factor driving their prices higher.

The BCC is calling on the Chancellor to ease the mounting pressure on businesses by implementing a series of measures. Suggested measures include a temporary energy price cap for small businesses, a one-year delay to the planned National Insurance hike in April, a halt to any potential business taxes or cost increases, and extra financial support through the expansion of the energy bills rebate scheme for households to also include small firms and energy intensive businesses.

Director General of the BCC Shevaun Haviland commented, ”Without help from the Treasury to weather this storm many businesses, especially smaller ones, will be faced with a nearly impossible situation that will leave them with little choice but to raise prices… Unabated, the surging cost pressures produced by the cost-of-doing-business crisis will continue to lead to increased prices and fuel the cost-of-living crisis currently being faced by people across the country.”

Gradual rate increase favoured

Speaking last week, Huw Pill, Chief Economist at the Bank of England (BoE) expressed his belief that policymakers should gradually increase interest rates as opposed to adopting an aggressive approach. When talking about the expected income squeeze in the coming months, he confirmed his support for the hard-hitting message conveyed by BoE Governor Andrew Bailey last week, when he cautioned that wages would need to fall in real terms this year to control inflation.

Job vacancies at record high

Job vacancies in the last quarter hit another record of almost 1.3 million, according to latest data from ONS. Wages rose by 3.7% during this period but, when taking inflation into account, fell by 0.8% in real terms from a year earlier.

Markets update

After the US and UK advised citizens to leave Ukraine amid fears of a Russian invasion, uncertainty weighed on markets. Global stocks bounced back on Tuesday as concerns eased following Russian claims that 100,000 troops were returning to bases following training exercises.

The global benchmark for oil, Brent Crude, traded above $96 a barrel on Monday, its highest in seven years, before dropping back on Tuesday to around $93 a barrel. Fuel prices continue to soar at the pumps, with the AA reporting a record high of 148p a litre on Sunday.

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.

The fine print of home insurance T&Cs

Few people enjoy reading the fine details of insurance terms and conditions. However, failing to do so can leave you with insufficient cover or, in the worst cases, the wrong type altogether.

Cost, time or font?

A fifth of UK adults admit to not checking the T&Cs before taking out insurance. The explanations are varied: a quarter of respondents to a recent survey1 said the T&Cs were too long, while 17% said they only care about the cost, not the details. 15% said they don’t have time to worry about the detail, and 6% were put off because the writing was too small.

Just under a fifth said they occasionally read the T&Cs of their home cover, while a hearteningly high 50% said they always check the small print.

We can help

It can end up costing you a lot more if you take out an insurance policy without checking the fine print. We can help make sure you have the right level and type of cover in place.

1Go Compare, 2021

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

Climate disclosures top corporate agendas in 2022

Regulators have been urged by the IMF to do more to prevent financial companies from making misleading claims concerning their environmental credentials – ‘Proper regulatory oversight and verification mechanisms are essential to avoid greenwashing.’  To achieve the expansion needed to reach the target of reducing worldwide carbon emissions to net zero by mid-century, will require a proper understanding by investors how their money is used.

From April the UK’s biggest companies will be required to make climate-related financial disclosures. Firms with a turnover in excess of £500m and at least 500 employees are expected to publish the climate-related risks they face. With the UK the first G20 country to make this compulsory, John Glen, Economic Secretary to the Treasury commented, “These requirements will not only help tackle greenwashing but also enable investors and businesses to align their long-term strategies with the UK’s net-zero commitments.”

The requirements for disclosure will be aligned to the Task Force on Climate-Related Financial Disclosures, backed by over 1,000 global financial institutions, and responsible for over $190trn of assets. Companies will need to “focus on the effects of climate change on their business” and communicate to investors how these are being managed, according to Chris Cummings, Chief Executive of the Investment Association.

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

Making savings for your children work

Many parents are keen to give their children a flying start financially by putting aside money throughout their childhood. Mums have been shown to be more likely to take the lead in this area, with most savings being held in cash products, such as cash Junior Individual Savings Accounts (JISAs) or premium bonds.

Mum’s the word

The research1 shows that 60% of those actively contributing to a child’s savings and investments were women. Researchers commented that this appears to fit in with a broader theme whereby women tend to connect investing to outcomes for their family more than to their own needs.

The survey also highlighted a drop-off in contributions as children get older. While 67% of new parents start saving or investing for their new-borns, this figure falls to 54% by the time children reach secondary-school age.

Is cash king?

The efforts of parents to save for their children is clearly admirable, but it is important to make sure that the money works hard for the long term. The JISA recently celebrated its tenth birthday, and the allowance has increased over the years from £3,600 a year in April 2011 to £9,000 a year today – currently stocks and shares JISAs make up just 3% of all accounts.

In times of rising inflation, sticking to cash can limit the impact of parents’ savings, as the real value of cash will be eroded over time. While not guaranteed, investment products have historically delivered better returns over the long term. It’s advisable to consider the options.

1Boring Money, 2021

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

News in Review

“I’m afraid we do have to raise Bank Rates… This is a lot of pressure on households”

Financial announcements came thick and fast last week, impacting household budgets and living standards for millions across the UK. As anticipated by many economic commentators, on Thursday the Monetary Policy Committee voted to increase Bank Rate from 0.25% to 0.5%, in an effort to dampen the pace of price rises over the longer term. Despite this move, the Bank of England (BoE) still expects inflation could reach 7.25% in April when energy bills are set to rise. This would be the fastest price growth since 1991 and is well above the Bank’s 2% target.

Earlier on Thursday, British energy regulators raised the energy price cap in England, Wales and Scotland by just under £700 from April. The same day, Rishi Sunak outlined plans to ease cost of living pressures, saying, “Right now, I know the number one issue on people’s minds is the rising cost of living. That’s why the government is stepping in with direct support that will help around 28 million households with their rising energy costs over the next year.”

The measures include:

  • All domestic electricity customers will receive an upfront discount worth £200 off their energy bills from October, the discount will then be automatically recovered from people’s bills in equal £40 instalments over the next five years
  • Households in England in Council Tax bands A-D will receive a £150 rebate, made directly by local authorities from April – this will not need to be repaid
  • Discretionary funding of £144m will be provided to support vulnerable people and individuals on low incomes who do not pay Council Tax, or who pay Council Tax for properties in Bands E-H
  • Devolved governments in Scotland, Wales and Northern Ireland are expected to receive £565m of funding as a result of the Council Tax Energy Rebate in England.

In an eventful day for the UK, Governor of the Bank of England Andrew Bailey commented on the MPC decision, “Unfortunately, we’ve got a squeeze from energy prices, and you see the Ofgem announcement this morning, and in order to counter the threat, and the risk that we see of further pressure coming from the labour market, I’m afraid we do have to raise Bank Rates. This is a lot of pressure on households, and we have to be very clear, a lot of pressure on those households who are less able to afford it.”

Markets react

Rising interest rates and inflation warnings across Europe weighed on global markets at the tail end of last week. European Central Bank President Christine Lagarde refused to rule out raising interest rates this year after its policymakers expressed ‘unanimous concern’ about soaring prices. Later, strong US labour data buoyed investors, who were energised by the higher-than-expected jump in jobs – a sign that the world’s biggest economy is recovering faster than hoped. On Tuesday the FTSE 100 briefly hit a new two-year high before slipping back as a fall in oil prices impacted the energy sector.

Levelling up strategy

On 2 February, the Levelling Up Secretary Michael Gove unveiled plans to transform the UK. Central to the plans announced are 12 national missions including local public transport systems becoming much closer to London standards, improving access to 5G broadband and the elimination of illiteracy and innumeracy in primary school leavers –  all to be achieved by 2030. Michael Gove commented, “Our 12 new national levelling up missions will drive real change in towns and cities across the UK, so that where you live will no longer determine how far you can go.”

“UK manufacturing made a solid start to 2022”

January’s IHS Markit/CIPS Purchasing Managers’ Index fell slightly from December (57.9 to 57.3) reflecting a small slowdown in the growth of new orders. Although input cost and output inflation are easing, supply chain constraint continues to prove challenging, but is regarded ‘passed its peak.’ Director at IHS Markit Rob Dobson commented on the recent data set, “UK manufacturing made a solid start to 2022, with growth of output accelerating as companies reported fewer supply delays.”

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.

Have you been ‘catfished’ by a property?

Not all prospective homebuyers will be familiar with ‘catfishing’ – a term from the online dating world to describe a person who presents themselves differently online to how they are in person. But a lot of them have suffered the catfishing experience at property viewings.

New word, familiar trend

A recent survey1 of homebuyers suggested that more than seven in 10 were ‘catfished’ by a property during their search. The most common issue was a property being much smaller than it appeared in photos.

Other let-downs included properties looking more outdated than expected, tiny rooms being advertised as extra bedrooms and poor build quality, which frequently led buyers to believe a property wasn’t worth the asking price.

Extra tools

The best way to avoid disappointment is by doing some extra research rather than relying on the estate agent’s photos. A floor plan can give you an idea of the actual size of each room, while a street view tool could give you a more realistic view of the state of the property.

1MoveStreets, 2021

Consumers and investors tune in to tackle climate change

More than half (57%) of consumers want their pension to be invested responsibly to help tackle climate change, but only one in seven people who have a pension have taken steps to invest it responsibly1.

Climate change and the environment are bigger concerns for most people than COVID-19 or the economy, according to a new study2. In all ten countries surveyed, climate change or the environment was the number one ESG (Environmental, Social and Governance) concern, reflecting the prominence of climate change in the global debate. Other environmental issues cited include waste management (8%), pollution (6%) and clean air (5%). Furthermore, over half of consumers are willing to boycott companies with poor ESG performance.

SEC Newgate Deputy CEO EMEA Tom Parker commented, “There is a widespread interest in and concern about the ethical and sustainability performance of governments and corporates. This is a truly worldwide phenomenon. The surprising consistency in these results illustrates that all local issues are global and that global issues are local.”

1Royal London, 2021

2SEC Newgate, 2021

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

News in Review

“The economy has recovered more quickly than expected, creating a growth dividend for the Treasury”

Some interesting data was released last week, which prompted speculation as to the Chancellor’s intentions regarding the rise in National Insurance Contributions (NICs) in April. The data showed that government borrowing reached nearly £17bn in December; despite this being the fourth highest December figure ever recorded, the figure was below expectations. Total borrowing in the first nine months of the 2021-22 financial year was £147bn, £13bn lower than Office for Budget Responsibility (OBR) projections outlined in the Autumn Budget.

At £16.8bn, public sector borrowing was £7.6bn lower than the December 2020 figure. The OBR said the deficit was less than anticipated due to higher Corporation Tax, Income Tax and VAT payments. The drop in the UK’s deficit led many commentators to speculate that a rethink about the planned increase in NICs could be on the cards as a cost-of-living crunch looms for many people.

Commenting on the Office for National Statistics (ONS) figures, Julian Jessop of the Institute for Economic Affairs, said this provides the “fiscal room” to discard the proposed NICs rise, adding, “The economy has recovered more quickly than expected, creating a growth dividend for the Treasury. Higher inflation is increasing the amount that the government has to spend on interest payments on inflation index-linked debt. However, the accompanying rise in nominal incomes is also increasing tax revenues and reducing the burden of debt as a share of GDP.”

He continued, “The government may still need to find more money later to fund a long-term increase in spending on health and social care, but the NICs hike in 2022-23 was intended to help with the one-off costs of fixing the backlog of NHS work caused by the pandemic. It is therefore entirely credible to use the growth dividend to pay these costs, rather than adding even more to the tax burden by raising NICs now.”

Heavily opposed but standing firm

Under the heavily criticised plans, employees, employers and the self-employed will be subject to a 1.25 percentage point National Insurance increase from April 2022 for a year. From April 2023, the extra tax will be collected as a new Health and Social Care Levy. 

However, over the weekend, Boris Johnson and Rishi Sunak insisted the ”progressive” £12bn NICs increase would go ahead, “We must clear the COVID backlogs… We must go ahead with the Health and Social Care Levy. It is the right plan.”

Lisa Nandy, Shadow Levelling-Up Secretary urged the government to “rethink” the planned rise, “You can’t possibly hit people with more taxes at the moment. It’s just simply not possible for a lot of people to survive.”

UK regains allure for global financial services businesses

A recent poll of senior decision-makers at international banks, asset managers and insurers, conducted by EY (Ernst & Young), determined that 87% of global financial firms intend to extend or expand operations in the UK this year – the highest percentage since 2016, and a marked increase on previous results (50% in 2021, 45% in 2020 and 11% in 2019). Notably, the vast majority (90%) of global financial services investors believe the UK will retain the same level of attractiveness or improve over the next three years. In addition, 87% of respondents said the UK offers the right environment for ESG (Environmental, Social and Governance) investment. UK Financial Services Managing Partner at EY, Anna Anthony commented on the findings, “It’s encouraging that such a high proportion of global financial services firms are currently looking to grow their business in the UK. This is testament to the stability and resilience of the mature UK market which continues to ably withstand the material challenges and uncertainty of both the pandemic and Brexit. As we look to the future of financial services, it’s also positive that investors see the UK as the right place for growth in ESG, which, post COP26, is a major and increasing focus for boards.”

US economy advances at pace

Last week, official data from the Commerce Department showed that the US economy expanded by 5.7% in 2021 – its strongest performance since 1984. With the Federal Reserve signalling the imminent withdrawal of stimulus, growth is expected to moderate this year. On Wednesday, the Fed said it is likely to hike interest rates in March, the first increase since 2018, and reaffirmed plans to end its bond purchases in the spring also.

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.

How to minimise your risk of property chain collapse

Picture the scene: you’ve found your dream home, you’re almost ready to exchange contracts, and then you get the call… your buyer has pulled out.

Domino effect

Such unexpected events in the property chain can leave your own purchase in jeopardy. Many property transactions are interlinked in this way, with the decision of one buyer having a knock-on effect on the whole chain. In the worst possible scenario, every single buyer will lose out on their new home.

Thankfully, there are actions you can take to speed up the process and reduce the risk of things going wrong.

Dodge the jeopardy

The first option is to avoid a chain altogether by finding a seller whose own transaction isn’t dependent on the sale of their property. However, this does limit your options and will not be possible for everyone. So, what steps can you take if you do find yourself in a chain?

Be organised

Getting your transaction over and done with as quickly as possible limits the chances of your chain collapsing. Be proactive in instructing your solicitor and other professionals, ensure you’re completing forms and sending them back as quickly as possible, and chase up any delays.

Don’t be afraid to rent

Depending on your circumstances, it may be possible to sell your home and rent for a little while so that you’re not dependent on a buyer. Likewise, if your seller’s transaction falls through, you may be able to ask them to rent on a short-term basis so that you can still complete your purchase.

Let us help

Another way you can speed up your transaction and protect your chain is by securing an agreement in principle with a mortgage provider before beginning your search. We can help you there – so get in touch.

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

Gen up to protect yourself from pension scams

With pension scam losses totalling millions each year, good news came in November, when new regulations came into force to protect pension savers and stop suspicious scam transfers.

From 30 November 2021, pension trustees and scheme managers received new powers to intervene. Previously pension providers were not allowed to refuse to carry out a transfer where the saver has the right to do so, even if they were suspicious, but the new regulations will enable trustees to prevent a transfer request if they see evidence of ‘red flags.’

Knowledge is power

The Financial Conduct Authority (FCA) has reaffirmed its commitment to tackling scams in order to ensure the long-term health of the pensions market. In a speech to delegates at the Pensions and Lifetime Savings Association, the FCA’s Executive Director of Markets Sarah Pritchard said steps have been taken to stop scams reaching consumers, “We want people to be better protected from the risks of scams and know how to protect themselves against them. Our ScamSmart campaign… gives knowledge and tools to help people protect themselves from scams.”

On-the-ball

We can all take simple steps to protect ourselves against potential scams, including:

  • Double check who you’re dealing with
  • Don’t give out personal information you wouldn’t share with a stranger
  • Don’t feel pressurised into making quick decisions.

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.