Reasons for economic optimism in the autumn months

Over the summer months, forecasting agencies took turns to upgrade their growth projections for developed nations as a succession of strong economic data was released. For example, in its latest assessment, the International Monetary Fund (IMF) increased its combined 2021 growth forecast for advanced economies by half a percentage point, primarily due to the success of vaccine rollouts and government stimulus measures supporting recovery. So, with the arrival of autumn, there are reasons to be optimistic, though future growth prospects are likely to be closely linked to the course the virus takes.

Uncertainties and risks

The IMF assessment did highlight a divergence in fortunes between rich and poor nations due to differing levels of access to vaccines. As a result, an offsetting downgrade across emerging markets and developing economies has resulted in the overall global growth forecast remaining unchanged.

Ongoing concerns surrounding inflation also persist, despite policymakers’ insistence that the recent upward trend in prices will prove to be transient. Furthermore, current levels of government and central bank spending can only be a temporary phenomenon and, when stopped, will certainly have an impact on growth.

Grounds for optimism

While the outlook is therefore expected to remain relatively uncertain, there are grounds for investor optimism. Market fundamentals remain comparatively strong, with earnings growth still being fuelled by pent-up demand as economies reopen, and companies start to invest again as the recovery continues to gather momentum.

Diversification remains vital

There is no question that the world is in a period of immense change, with issues relating to the pandemic, as well as sustainability, fundamentally changing the investment landscape. Some things, however, do not change, like the importance of holding a diversified investment portfolio and the need for expert financial advice. That’s where we come in.

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.

Robust recovery for housing and mortgage markets

Projections produced by the Intermediary Mortgage Lenders Association (IMLA) suggest gross mortgage lending will reach £285bn this year. This revision, upgraded from a previous forecast of £283bn, points to the housing and mortgage markets’ continued strength in the face of pandemic-related challenges.

A strong housing market has caused a surge in mortgage lending. In the first five months of 2021, lending for house purchase was 87% higher than the same period in 2020 and 51% above the same period in 2019. Buy-to-let lending has also increased, propelled by house purchase transactions.

Peak buying

Housing turnover is expected to remain buoyant into Q3, with an additional 120,000 property transactions. However, after the high levels of market activity during the Stamp Duty holiday, the IMLA expects gross lending to dip in 2022, reducing its forecast from £286bn to £280bn.

Quieter spell to come?

While the Stamp Duty holiday has fuelled rising house prices, a slightly more subdued picture is likely to emerge following the end of the taper (30 September in England and Northern Ireland). This isn’t certain, however: in Scotland, where the Land and Buildings Transaction Tax reduction ended in March, buyer momentum has remained resilient and house prices have continued to rise at pace.

Kate Davies, Executive Director of the IMLA, commented, “With the Stamp Duty holiday soon coming to an end, and the Help to Buy scheme due to conclude in 2023, there is still a need for a coherent, long-term housing strategy from the government that embraces the public as well as the private sectors.”

More deals, lower rates

Separate figures1 show the number of mortgage deals has risen from 4,512 in July to 4,660 in August. At the same time, the average rate for two-year and five-year fixed rate products has fallen to 2.52% and 2.75% respectively.

The best deals aren’t lasting long though. If you’re looking to lock into a low rate, get in touch now and we can find the most suitable mortgage for your circumstances.

1Moneyfacts, 2021

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

Economic Review – September 2021

Upgrade to UK GDP growth

The Office for National Statistics (ONS) has revised UK economic growth for Q2 2021 to 5.5% from an original estimate of 4.8%. The UK’s level of GDP is now 3.3% below where it was pre-pandemic in Q4 2019, revised from the previous estimate of 4.4% below.

Other ONS data indicates a loss of momentum more recently, with the economy growing by 0.1% in July. Although this represents a sixth successive month of growth, the figure was lower than June’s 1.4% rise and below the 0.6% average forecast predicted in a Reuters poll of economists.

July’s slowdown partly reflects an upsurge in COVID cases and the resulting ‘pingdemic’, with ONS saying some businesses complained of staff being unable to attend work due to self-isolation requirements. Additionally, analysts said the slowdown highlighted the impact of supply chain disruptions.

More recent survey data also shows supply chain issues continue to weigh on the recovery. The closely watched IHS Markit/CIPS flash composite Purchasing Managers’ Index (PMI), for instance, fell from 54.8 in August to 54.1 in September. While any reading above 50 does still imply growth, this was a fourth consecutive monthly decline, signalling a loss of momentum across the UK private sector.

IHS Markit’s Chief Business Economist Chris Williamson said, “The survey also points to business activity being increasingly constrained by shortages of materials and labour, most notably in the manufacturing sector but also in some services firms. A lack of staff and components were especially widely cited as causing falls in output within the food, drink and vehicle manufacturing sectors.“

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BoE raises inflation forecast

The Bank of England (BoE) recently increased its near-term inflation forecast and signalled that the case for a ‘modest‘ tightening of monetary policy over the next few years has ‘strengthened‘.

At a meeting ending on 22 September, the BoE’s Monetary Policy Committee (MPC) voted unanimously to leave interest rates unchanged at the historic low of 0.1% and to maintain its existing economic stimulus programme by a majority of seven votes to two. However, growing concerns with regards to cost pressures were expressed, with the minutes to the meeting stating that, ‘inflation is expected to rise further in the near term, to slightly above 4% in 2021 Q4, owing largely to developments in energy and goods prices.‘

While stressing no immediate action was currently required, the MPC did announce it had dropped previous guidance stating it would not consider tightening monetary policy until the economy had recovered materially from the pandemic. It also stated that recent developments had ‘strengthened‘ the case for ‘modest tightening‘ over the Bank’s forecast period.

Although the MPC minutes again reiterated the Bank’s ‘central expectation’ that current global price pressures will prove ‘transitory,’ the latest data does suggest inflationary pressures have intensified in recent months. Statistics released by ONS, for example, revealed a record monthly jump in the Consumer Prices Index (CPI). In August, this measure of annual inflation rose to 3.2%, up from 2.0% in July and 0.3% higher than the consensus forecast in a Reuters poll of economists.

Furthermore, data from the latest IHS Markit/CIPS PMI suggest inflationary pressures show little sign of abating. Input costs were reported to have increased sharply in September, with businesses attributing the rise to higher wage costs, the impact of supply chain disruption and rising transportation costs; and in response, firms increased their selling prices at the greatest pace on record.

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Markets: (Data compiled by TOMD)

As the third quarter drew to a close, supply chain concerns and fears of higher inflation, impacted market sentiment. In the UK, London’s indices slipped back at month end, after better-than-expected economic growth data renewed speculation that an interest rate increase could be on the cards. The FTSE 100 ended the month on 7,086.42, a small loss of 0.47%. The FTSE 250 index closed on 23,031.29, a monthly loss of 4.44%. The Junior AIM index closed on 1,243.82.

US stocks moved lower at month end, even after a spending bill was passed to avert a US government shutdown. Investors are bracing for a wind-down in stimulus, amid growing concerns about economic growth. In the US, the Dow Jones ended the month down 4.29% to close on 33,843.92 and the NASDAQ recorded a loss of 5.31%.

In Japan, the Nikkei 225 gained 4.85% in the month, to close on 29,452.66. Led by cyclical stocks, sentiment was boosted by progress in domestic vaccine rollouts, raising hopes for an economic reopening. The Euro Stoxx 50 lost 3.53% in the month to close on 4,048.08.

On the foreign exchanges, sterling closed the month at $1.34 against the US dollar. The euro closed at €1.16 against sterling and at $1.15 against the US dollar.

Oil prices have been rising on the back of the energy crisis in Europe. Analysts believe oil prices will continue to rise amid surging demand. Brent Crude is currently trading at around $78 per barrel, a gain of over 9% on the month. The gold price rose over 2% on the last trading day of the month, after the dollar fell on poor US weekly jobs numbers, but recent declines, driven by expectations the Fed will soon start tapering economic support, kept gold on track for a monthly and quarterly fall. Gold is currently trading at around $1,730 a troy ounce, a loss of around 4.5% over the month.


Index Value
(30/09/21)		   % Movement
(since 31/08/21)
  FTSE 100 7,086.42 0.47%
  FTSE 250 23,031.29 4.44%
  FTSE AIM 1,243.82 3.80%
  EURO STOXX 50 4,048.08 3.53%
  NASDAQ Composite 14,448.58 5.31%
  DOW JONES 33,843.92 4.29%
  NIKKEI 225 29,452.66 4.85%

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Job vacancies hit record high

ONS data has revealed that job vacancies now stand at an all-time high as employers report the most severe shortage of job candidates on record.

The latest employment statistics show the labour market continues to recover from the pandemic, with the number of people in pay rolled employment rising by a further 241,000 in August. This lifts the total number of employees on company payrolls to 29.1 million, slightly above pre-pandemic levels.

Despite this rise, demand for staff remains high, with the official number of job vacancies passing the one million mark for the first time since records began in 2001. While the end of furlough will inevitably bring some people back into the jobs market, the Confederation of British Industry has warned it will not be a ‘panacea‘ that will ‘magically fill labour supply gaps.’

A survey by the Recruitment and Employment Confederation recently reported the most severe shortage of job candidates on record, and business groups have said the government decision to grant temporary visas to 5,000 HGV drivers and 5,500 poultry workers will have little impact on the situation. Indeed, the British Chambers of Commerce likened the move to ‘throwing a thimble of water on a bonfire.’

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Retail sales in downward trend

Although retail sales volumes remain above pre-pandemic levels, August’s official data revealed a record fourth consecutive monthly decline, while survey evidence points to a continuation of this trend in September.

According to ONS figures, retail sales fell unexpectedly in August, with volumes 0.9% lower than July. This fall partly reflects a spending switch from supermarkets to restaurants following the removal of hospitality restrictions, while retailers also said supply chain disruption had hit sales. Downward revisions to previous months’ data also mean volumes have now been steadily declining since April’s lockdown easing peak.

Data from the latest Distributive Trades Survey published by the Confederation of British Industry (CBI) also suggests this downturn continued last month with sales growth slowing to a six-month low in September. In addition, the survey reported stock levels relative to expected sales across the distribution sector at a record low.

Commenting on these supply chain difficulties, CBI Principal Economist Ben Jones said, “Low stock adequacy remains a concern across the distribution sector. Respondents to our survey have told us that they do not expect the transport and production issues that are causing these shortages to ease significantly until at least next year and, in some cases, beyond.“

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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.

Pension savers enticed by ‘risky’ investments

At a time where it is becoming harder to save up adequate sums for retirement, a new study shows that the UK’s low interest rate environment is causing retirees to turn to riskier pension and investment products which could potentially lose them a significant sum.

Risky business

A poll from the Financial Services Compensation Scheme (FSCS), shows that one in five people aged between 55 and 75 have been tempted to invest in riskier products than those they would ordinarily be comfortable with, lured by a higher rate of return. And, surprisingly, less than one in eight had taken financial advice to explore alternative options for making the most of their cash.

“Life-changing” losses

This has resulted in a rising number of people seeking compensation under the FSCS arrangements, said Chief Executive Caroline Rainbird. She continued, “The real danger is that if consumers choose to put money into high-interest pension and investment products that are not FSCS protected, they could lose life-changing sums of money from their retirement pots if the product provider fails.”

Professional advice is key The FSCS survey is yet another example of research vividly highlighting the importance of seeking professional financial advice before investing in little-known products. Advice helps investors explore and understand the risks before taking the plunge and putting their hard-earned money at risk. Whether you’re approaching retirement or have already retired, we can assist you in maximising your savings whilst minimising the risk.

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

‘Against a backdrop of robust goods demand and continuing supply constraints, global inflationary pressures have remained strong’

In a unanimous decision, the Bank of England (BoE) Monetary Policy Committee (MPC) voted to maintain Bank Rate at its record low of 0.1% last week. The vote came as the supply chain crisis, largely driven by an ongoing shortage of heavy goods vehicle (HGV) drivers, shows signs of holding back economic recovery.

This certainly seems to be borne out by the MPC’s latest forecast, which has revised expectations for Q3 growth down by 1% compared with its August projections. The Monetary Policy Summary of September outlined, ‘Since the August MPC meeting, the pace of recovery of global activity has showed signs of slowing. Against a backdrop of robust goods demand and continuing supply constraints, global inflationary pressures have remained strong and there are some signs that cost pressures may prove more persistent.’

The BoE also projected that inflation would reach above 4% in the final quarter of 2021, twice the target level of 2%, ‘owing largely to developments in energy and goods prices.’ Soaring gas prices have so far caused nine suppliers to go bust this year, affecting nearly two million households. However, the MPC maintained its position that many of the factors driving current inflation levels will prove transitory, with inflation falling back to close to the 2% target over the medium term.

Expected to be addressed in the MPC’s November report is the end of the furlough scheme on 30 September and its impact on the labour market and economic recovery.

US economy defies rise in Delta cases

Rising COVID infections across the United States, attributed to the Delta variant of the virus, have not hindered economic recovery, it seems. This is according to the US Federal Reserve, which said the labour market was recovering and high levels of inflation – currently at 5.3% – will prove temporary. It said it may start cutting back on emergency economic support ‘soon,’ but did not specify further.

The country has not been unaffected, however; the Federal Open Market Committee, responsible for setting US monetary policy, commented that increased cases were slowing the pace of recovery.

The US Central Bank remains cautious in its approach, stating that monetary policy and the course of the economy still depended largely ‘on the course of the virus.’

London – an investment powerhouse

Five years after the referendum results set the UK on the path to Brexit, the City of London still holds the lion’s share of the European investment management market, according to a new report from the Investment Association. Its data reveals that London holds a massive 37% market share – larger than Paris (18%), Frankfurt (10%) and Zurich (8%) combined.

The world’s second largest investment centre after the United States, the UK also remains an attractive hub for overseas investment. The report shows that overseas clients accounted for 44% of total assets under management in the UK, or £4.2trn, as of the end of 2020.

In a year marked by economic turmoil, total funds under management for UK investors nevertheless rose by 11% year-on-year to stand at £1.4trn.  

Market update

After a frenetic weekend in the UK, where the spiralling petrol crisis forced the government to suspend competition law to help oil companies work together to deliver fuel to petrol stations, the FTSE 100 held onto gains on Monday, as it benefited from a strong session for major oil stocks. On Tuesday, the FTSE 100 fell back as energy prices continued to soar, with the price of oil reaching a three-year high, stoking concerns that supply chain problems may prompt a slowdown in economic activity.

German election news

Preliminary results show the Social Democratic Party (SPD) claimed a narrow victory in the German election at the weekend. The verdict means that a coalition will need to be formed, with negotiations potentially taking months. With Germany taking over leadership of the G7 in January, the main parties want a new government in place by the end of the year. In the meantime, Angela Merkel will remain Chancellor.

Here to help

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

News in Review

“This is fundamentally a growth market, and we see it continuing to be that way”

The travel industry has featured prominently in the news over the past seven days, with an easing of travel restrictions announced on both sides of the Atlantic. Last Friday, simplification of the traffic light system and testing requirements in England, was greeted positively by business groups, with the British Chambers of Commerce describing the move as ‘very welcome news for businesses in the travel sector and beyond.’ And on Monday, the US announced a relaxation of its COVID travel restrictions, with fully vaccinated UK and EU citizens allowed to fly to the country from November. Boris Johnson is currently visiting President Biden at the White House to discuss various issues including trade, climate change, Northern Ireland and Afghanistan.

Meanwhile, Boeing published its annual 20-year jet market forecast last week, predicting a full air travel recovery by 2024, followed by a resumption of long-term demand growth. In a press briefing, the company’s Vice President of Commercial Marketing, Darren Hulst said, “This is fundamentally a growth market, and we see it continuing to be that way.” In a bullish assessment, Mr Hulst also noted that “the global economy is trending back to where it would have been had the virus not actually happened.”

Inflation rises sharply

Amongst a raft of economic data released by the Office for National Statistics (ONS) during the last seven days, the latest inflation figures revealed a record monthly jump in the rate of price rises. The Consumer Prices Index (CPI) measure of annual inflation hit 3.2% in August; this was up from 2.0% the previous month and 0.3% higher than City economists’ consensus forecast. However, ONS pointed out that the impact of last year’s Eat Out to Help Out Scheme on the cost of restaurant meals, was a key contributor to the sharp increase and suggested that ‘much’ of the rise was ‘likely to be temporary.’

Economists do though expect the CPI rate to continue rising over the next few months, partly due to a sharp hike in household energy bills. Indeed, the soaring cost of wholesale gas and electricity was a recurring theme last week, as prices surged after a key electricity interconnector in Kent was taken offline following a fire. The surge in wholesale prices has not only fuelled concerns about rising inflation, but also sparked fears that a growing number of smaller energy firms could go out of business.

Retail sales fall again

ONS data released last Friday also showed that retail sales unexpectedly fell in August, with volumes down 0.9% compared to July. Although sales remain well above pre-pandemic levels, downward revisions to previous months’ data now shows a steady decline since April’s lockdown easing peak, with August marking a record fourth consecutive monthly decline.

According to ONS, the further easing of hospitality restrictions impacted the latest data, with spending switched away from supermarkets in favour of restaurants and bars. Shops also reported supply chain issues, with separate ONS data showing 6.5% of all retail businesses unable to get the stocks and other goods and services they needed in August, with department stores and clothes shops particularly badly affected by this disruption.

Borrowing higher than expected

On Tuesday, public sector finance statistics showed that government borrowing remains on a downward trajectory, although the latest decline was lower than analysts had expected. In August, the government borrowed £20.5bn; this was £5.5bn below the comparable month last year but a similar amount above the average forecast in a Reuters poll of economists. Higher interest payments on inflation-linked bonds saw the cost of servicing the government’s debt rise to £6.3bn last month, almost twice the level recorded a year earlier.

Labour shortages remain a concern

A Confederation of British Industry (CBI) and Pertemps Network survey released on Monday, has again highlighted ongoing business concerns over the impact of labour shortages. The survey found that just over three quarters of all businesses reported access to labour as a threat to the UK’s labour market competitiveness; the highest proportion since this question was first asked in 2016. Firms have been struggling to recruit staff following the pandemic and Brexit, and the CBI said that supporting firms to plug the shortages gap in the immediate term is vital.

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.

Residential Property Review – September 2021

Signs of solidity in UK housing market

After reaching record highs in June, the housing market is now ‘taking a breather‘, according to the Royal Institution of Chartered Surveyors’ (RICS) August survey.

New buyer enquiries fell for a second consecutive month, with the latest net balance dropping to -14%. Despite this slip in demand, supply still lags; new listings fell with a net balance of -37%, an eighth negative reading in the past nine months. Sales were also down in August, with a net balance of -18%.

Despite this headline negativity, the RICS survey anticipates near-term sales growth, evidenced by the three-month expectations indicator remaining at +4%. Meanwhile, Savills foresees a ‘small spike in September‘ as some buyers take advantage of the final phase of the Stamp Duty holiday before the nil-rate threshold reverts to £125,000 in October.

Commenting on the survey, RICS Economist, Tarrant Parsons said, “The latest survey evidence inevitably points to market activity taking a breather following the flurry of sales seen ahead of the tapered Stamp Duty holiday withdrawal. That said, while momentum has eased relative to an exceptionally strong stretch earlier in the year, there are still many factors likely to drive a solid market going forward.”

New government investment in affordable homes

The government has allocated £8.6bn to deliver around 119,000 new affordable homes, of which 57,000 will be available to buy.

Part of the Affordable Homes Programme, the funding should help thousands of buyers onto the property ladder. Since the first lockdown effectively shut down the construction industry, the supply of new homes has been badly hit at a time when housing demand has soared. The resulting mismatch between supply and demand has forced prices higher, making home ownership an impossible dream for many.

Previous government initiatives such as First Homes, a scheme offering new homes at a 30% discount on the open market value, have tried to make buying a house more affordable. There is certainly demand for such assistance; a record 55,649 households used Help to Buy to purchase a property in the year to the end of March.

Energy efficiency crucial to Scotland’s housing strategy

As Glasgow prepares to host COP26 in November, this year’s Scottish Housing Day (15th September) focused on the climate emergency.

Housing currently accounts for around 15% of Scotland’s greenhouse gas emissions. Therefore, to achieve the Scottish government’s commitment to net zero emissions by 2045, household energy efficiency will need to be at the forefront of government strategy.

A recent Knight Frank Global Buyer Survey revealed an appetite for change in the UK, with 84% of respondents citing the energy efficiency of a future home as being important to them.

Nicola Barclay, Chief Executive of Homes for Scotland, said, “Scottish Housing Day has a timely role to fulfil in focusing minds on the energy efficiency of our homes, particularly on how we close the performance gap between new and older properties.”

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House Prices Headline statistics

House Price Index (July 2021)* 134.0*

Average House Price £255,535

Monthly Change -3.7%

Annual Change 8.0%

*(Jan 2015 = 100)

  • Average house prices in the UK increased by 8.0% in the year to July 2021
  • On a non-seasonally adjusted basis, average house prices in the UK decreased by 3.7% between June and July 2021
  • House price growth was strongest in the North East where prices increased by 10.8% in the year to July 2021.

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House Prices Price change by region

Region   Monthly Change (%) Annual Change (%) Average Price (£)
England   -4.5 7.0 £270,973
Northern Ireland
(Quarter 2 – 2021)		 2.9 9.0 £153,449
Scotland 2.0 14.6 £177,166
Wales   -4.0 11.6 £187,960
East Midlands -5.5 6.9 £214,169
East of England -3.8 6.8 £312,076
London -2.0 2.2 £494,673
North East -3.5 10.8 £144,935
North West -7.6 8.1 £185,171
South East -1.3 8.8 £354,278
South West -5.8 5.2 £277,178
West Midlands Region -4.9 8.5 £220,759
Yorkshire & The Humber -6.8 6.9 £180,324

Source: The Land Registry
Release date: 15/09/21 Next data release: 20/10/21

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Average monthly price by property type – July 2021

Property Type Annual Increase
Detached
£391,747		 8.9%
Semi-detached
£245,218		 8.6%
Terraced
£207,267		 7.7%
Flat / maisonette
£218,829		 6.1%

Source: The Land Registry
Release date: 15/09/21

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Renters return to cities

“There has been a sharp rise in demand for rental properties in recent months, especially in central city markets, signalling the return of city life, as offices and other leisure and cultural venues continue to open up more fully.“

Gráinne Gilmore, Head of Research at Zoopla
Source: Zoopla September 2021

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Contains HM Land Registry data © Crown copyright and database right 2017. This data is licensed under the Open Government Licence v3.0.

All details are correct at the time of writing (16 September 2021)

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

Commercial Property Market Review – September 2021

Robust figures for commercial property market

Commercial property investment volumes reached £31.4bn at the end of July, according to the most recent UK Commercial Market in Minutes report from Savills. This was 32% above the same period in 2020 and 4% higher than the five-year average.

Savills also noted a promising rise in the three-month rolling total for investment volumes. The May-July 2021 reading of £16.1bn was a 38% increase on the previous three-month period. Industrial assets received the highest quantum of investment for the period measured. At £9.7bn, this equated to 31% of total investment, above its share (14%) in 2018.However, total investment for industrial assets remained 7% below the same period in 2018. Likewise, regional office investment volumes were 40% up on 2020 but 23% below their 2018 level.

An interesting trend highlighted in the report is the shifting pattern of affordable workspaces. Traditionally, cheaper fringe space has helped generate economic growth by providing space for new entrepreneurs and creatives. Over the last decade, however, the pattern has somewhat flipped. In London, office rents have risen sharply in cheaper locations; 53% in the fringe compared to 29% in the city core. As a result, the gap between core and fringe rents (previously 19%) has vanished. Indeed, by the end of 2020, fringe locations had nudged slightly ahead.

Return of workers sparks office space war

As firms start welcoming workers back to the office, footfall is increasing in city centres. This bodes well for the office sector, but commercial landlords still face several challenges.

Across UK high streets, footfall rose by 2.6% in the first week of September, according to data from Springboard. This was even higher in inner London, where footfall jumped by 4.1%.

Office space provider IWG reported a ‘very strong recovery‘, as occupancy rates bounced back. Similarly, property firm Derwent London said that rent collection had returned close to prepandemic levels with net rental income for the six months to the end of June rising to £90.1m from £84.4m in 2020.

This bounce-back looks set to provoke a “war for space“, according to Derwent boss Paul Williams. He thinks tenants now want “the right space, not just the cheapest space“, which perhaps spurred Derwent’s recent acquisition of two buildings in the ‘knowledge quarter’ on Euston Road and Tottenham Court Road.

IWG is adapting to the new environment by adding space outside London. Mark Dixon, IWG’s Founder and CEO, commented, “This fundamental shift in the way people work is clearly a positive tailwind and we are seeing increasing levels of interest from enterprises wishing to transform their working practices.”

Meanwhile, scrutiny is increasing over offices’ environmental impact, which is driving demand for greener offices. The upcoming UK energy efficiency standards will tighten regulation of commercial buildings’ energy performance from 2023.

Industrial assets received the highest quantum of investment for the period measured. At £9.7bn, this equated to 31% of total investment, above its share (14%) in 2018.

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Commercial property currently for sale in the UK

  • Regions with the highest number of commercial properties for sale currently are South West and North West England
  • Northern Ireland currently has the lowest number of commercial properties for sale (27 properties)
  • There are currently 1,324 commercial properties for sale in London, the average asking price is £1,543,108.

Region No. properties AVG. asking price
London 1,324 £1,543,108
South East England 1,170 £1,876,405
East Midlands 761 £972,889
East of England 750 £613,663
North East England 787 £331,016
North West England 1,431 £413,511
South West England 1,528 £563,369
West Midlands 1,156 £470,105
Yorkshire and The Humber 1,126 £313,856
Isle of Man 53 £485,081
Scotland 1,123 £321,800
Wales 798 £404,265
Northern Ireland 27 £457,019

Source: Zoopla, data extracted 16 September 2021

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Commercial property outlook

Investment enquiries – broken down by sector



  • A net balance of +64% reported an increase in demand for industrial space
  • This reading for industrial is the highest on record
  • Retail and office sectors remain in negative territory at -28% and -4% respectively.

Source: RICS, UK Commercial Property Market Survey, Q2 2021

Capital value expectations – broken down by sector

  • For the coming 12 months, strong industrial capital value growth is expected across the UK
  • Prime and secondary retail values are still anticipated to see widespread declines, but less negative than previously
  • In the office sector, prime values are now seen holding steady in the year to come, even if the outlook remains comfortably negative for secondary.

Source: RICS, UK Commercial Property Market Survey, Q2 2021

All details are correct at the time of writing (16 September 2021)

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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

“This rise will impact the wider economic recovery”

Over the past seven days, government plans to raise National Insurance contributions to fund the health and social care system have continued to feature prominently in the news headlines. Last Wednesday, despite warnings of a mass Tory rebellion, MPs voted by 319 votes to 248 to approve the new ‘health and social care levy’. Earlier that day, the Prime Minister had defended the move, insisting it was “the reasonable and the fair approach”, despite it breaking a key manifesto commitment.

The decision, however, came under intense fire from business groups. Manufacturers’ organisation, Make UK, described it as ‘ill-timed as well as illogical,’ while the Federation of Small Businesses said the tax hike marks ‘an anti-jobs, anti-small business, anti-start-up manifesto breach.’  British Chambers of Commerce (BCC) Head of Economics, Suren Thiru, said, “This rise will impact the wider economic recovery by landing significant costs on firms when they are already facing a raft of new cost pressures and dampen the entrepreneurial spirit needed to drive the recovery.”

UK growth rate slows sharply

According to the latest gross domestic product statistics published last Friday, the UK economy grew by 0.1% in July. While this represents a sixth consecutive month of growth, the increase was much lower than June’s figure of 1% and significantly below the consensus forecast of 0.6% taken from a Reuters poll of economists. Analysts said the slowdown was primarily due to July’s upsurge in COVID cases and the ‘pingdemic’, which left many workers self-isolating at home. In addition, the figures highlight the ongoing impact of supply chain problems.

Trade deficit on the rise

Other data released last Friday showed Britain’s goods trade deficit at a seven-month high of £12.7bn in July. This widening was driven by a 6.5% fall in goods exports to the EU, which was only partially offset by a 5% rise in exports to non-EU countries.

Data published the previous day revealed that Germans spent nearly 11% less on British goods during the first six months of 2021, with the UK now expected to drop out of Germany’s top 10 trading partners by the end of this year for the first time since 1950. BCC Head of Trade Policy, William Bain, commented, “Exports to the EU fell in July. Taken in conjunction with German trade data, the UK is clearly doing less trade with the EU than three years ago. Overall, the figures remain concerning.”

Labour market recovery continues

There was brighter news on the jobs front though, with Office for National Statistics data released on Tuesday showing the labour market continuing to recover. The latest official figures put employee numbers back at pre-COVID levels; job vacancies at an all-time high, while unemployment continues to fall. This situation, however, is creating problems for employers, with a survey published last week by the Recruitment and Employment Confederation reporting the most severe shortage of job candidates on record.

Other data released last week showed the number of people on furlough stood at 1.6 million at the end of July, 340,000 fewer than the previous month. Estimates suggest up to a million employees could still be on furlough when the scheme winds down at the end of September and this continues to cast a high degree of uncertainty over the labour market. The Confederation of British Industry recently warned that, while the end of furlough will inevitably bring some people back into the jobs market, it will not be a ‘panacea’ that will ‘magically fill labour supply gaps.’

US-China trade relations

Last week also saw hopes of a reset to the strained US-China relationship. In their first conversation for seven months, US President Joe Biden spoke by phone to his Chinese counterpart Xi Jinping last Thursday night. The White House said the 90-minute call had been initiated by Mr Biden and that the two leaders had a “broad, strategic discussion”. The pair discussed the “responsibility of both nations to ensure competition does not veer into conflict” and this has raised hopes of a potential improvement in US-China trade relations.

Autumn and Winter Plan

On Tuesday,the government announced measures to deal with rising COVID cases in England over the winter. If Plan A is not sufficient to prevent “unsustainable pressure “on the NHS, Plan B will be required as a “last resort.”

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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.

Don’t believe these mortgage deposit myths…

Taking out a mortgage is something thousands of us do every year, and yet misinformation about the mortgage process – and particularly deposits – is rife.

So, here are a couple of deposit myths you shouldn’t believe:

  1. You need a huge deposit to be approved

Many people believe you’ll only get approved for a mortgage with a hefty deposit, which means those with smaller deposits are discouraged from trying. While it’s true that a larger deposit will result in lower monthly repayments and often better rates, it is not the be all and end all. Indeed, the government recently launched a mortgage guarantee scheme for those with small deposits, enabling more people to get onto the property ladder.

2. Your deposit is your only major cost

When it comes to the cost of buying a property, many people only factor in the deposit as an initial cost. Unfortunately, there are a few other costs to consider that can really add up. Solicitors’, estate agents’ and surveyors’ fees can cost several thousands, while Stamp Duty means many buyers will also face a significant tax bill.

Let us help

Whether you need advice on saving for a deposit or help with finding the most suitable mortgage for your circumstances, let us help. Get in touch and we can help make your homeownership dreams a reality.

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. You may have to pay an early repayment charge to your existing lender if you remortgage.