Autumn Budget & Spending Review 2021

“An economy fit for a new age of optimism”

Chancellor of the Exchequer, Rishi Sunak, delivered his third Budget and the results of his Spending Review on 27 October, declaring that it begins “the work of preparing for a new economy post-COVID.” The Chancellor struck an upbeat tone during the key fiscal event, as he outlined his vision of “an economy fit for a new age of optimism, where the only limit to our potential is the effort we are prepared to put in and the sacrifices we are prepared to make.”

Economic forecasts

The Chancellor began his statement by revealing updated projections from the Office for Budget Responsibility (OBR), which predict that recovery from the depths of the pandemic will be quicker than previously thought. The revised figures suggest that the UK economy will grow by 6.5% this year, a significant upgrade from March’s 4% figure. The forecast implies the economy will regain its pre-pandemic level by the turn of the year, six months earlier than previously expected.

Medium-term GDP predictions were also upgraded as the OBR now estimates that long-term pandemic-related economic scarring will be 2% rather than the 3% assumed in March. As a result of this, along with a number of government policy changes, public sector net borrowing is now projected to be equivalent to 7.9% of economic output, down from the previous forecast of 10.3%. In addition, borrowing figures across each of the subsequent four financial years have also been lowered.

The Chancellor did, however, acknowledge that the cost of living is rising. The OBR predictions suggest the CPI measure of inflation will average 4% over the next year, peaking at 4.4% in the second quarter of 2022. Mr Sunak said, “The pressures caused by supply chains and energy prices will take months to ease” adding “it would be irresponsible for anyone to pretend that we can solve this overnight.”

Spending Review

Prior to Budget Day, the Treasury had released a series of funding announcements including statements setting out spending plans for transport, health and education. During his speech, Mr Sunak stated that his Budget “increases total departmental spending over this Parliament by £150bn, with spending growing by 3.8% a year in real terms.” He added, “As a result of this Spending Review, and contrary to speculation, there will be a real terms increase in spending for every government department.”

The specific spending pledges mentioned during the Chancellor’s speech include:

  • £21bn on roads and £46bn on railways, with a guarantee to spend £5.7bn on London-style transport systems across city regions
  • £3.8bn on skills and training over the course of this Parliament
  • £1.7bn in grants from the Treasury’s Levelling Up Fund for towns and cities including Stoke-on-Trent, Leeds, Sunderland, Doncaster and Leicester
  • £5.9bn in funding for the NHS to tackle the immediate backlog of patients awaiting treatment
  • Scottish government funding will rise by £4.6bn; Welsh government funding by £2.5bn, and £1.6bn more for the Northern Ireland Executive.

Personal taxation, wages and pensions

Following the recommendations of the independent Low Pay Commission, the government will increase the National Living Wage for individuals aged 23 and over by 6.6% from £8.91 to £9.50 an hour, effective from 1 April 2022.

The taper rate that applies in Universal Credit will be reduced from 63% to 55% by 1 December 2021 and the Work Allowance will be increased by £500 a year.

The Chancellor announced that the year-long freeze on public sector pay will be lifted as the economy recovers from the pandemic, with the government seeking recommendations from Pay Review Bodies where applicable.

The new Health and Social Care Levy, announced in September, will be introduced across the UK from April 2022. The tax will initially begin as a 1.25 percentage point increase in National Insurance contributions, paid by both workers and employers. From April 2023, it will become a separate tax on earned income, calculated in the same way as National Insurance and ring-fenced as a Health and Social Care Levy. Tax on share dividends that are outside tax-free allowances is also scheduled to increase by 1.25 percentage points from April 2022.

As previously announced and following the government’s decision to suspend its triple lock guarantee for one year, September’s CPI rate will be used to calculate the uplift in the State Pension. As a result, the value of the basic State Pension will increase in April 2022 from £137.60 to £141.85 per week, while the full new State Pension will rise from £179.60 to £185.15 per week.

The 2022/23 tax year ISA (Individual Savings Account) allowance will remain at £20,000. The JISA (Junior Individual Savings Account) allowance and Child Trust Fund annual subscription limit will stay at £9,000.

Many tax allowances remain unchanged, as previously announced in the March Budget:

  • The Income Tax Personal Allowance and higher rate threshold are to remain at current levels – £12,570 and £50,270 respectively – until April 2026 (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
  • Inheritance Tax nil-rate bands continue to remain at existing levels until April 2026 – £325,000 nil-rate band, £175,000 residence nil-rate band with taper starting at £2m
  • The Capital Gains Tax annual exemption remains frozen at £12,300 for individuals, personal representatives and some types of trusts, and £6,150 for most trusts
  • The Dividend Allowance remains at £2,000
  • The Lifetime Allowance for pensions will remain at its current level of £1,073,100 until April 2026.

Business taxes

Business rates will be reduced by a total of over £7bn over the next five years:

  • Up to 400,000 eligible retail, hospitality and leisure properties can claim a new 50% business rates discount (max £110,000) for one year – worth £1.7bn of business rates relief (2022/23 tax year)
  • The business rates multiplier will be frozen in 2022/23, a tax cut worth £4.6bn over the next five years
  • From 2023, a new business rates relief will support investment in property improvements so that no business will face extra business rates for 12 months after making qualifying improvements to a property they occupy
  • Also from 2023, exemptions will be introduced for eligible plant and machinery used in onsite renewable energy generation and storage as well as a new 100% relief for eligible heat networks.

The government also intends to support UK businesses by extending the temporary £1m limit of the Annual Investment Allowance to 31 March 2023, providing businesses with upfront support, encouraging them to bring forward investment and simplifying tax for businesses investing between £200,000 and £1m.

Children and education

“The evidence is compelling that the first 1,001 days of a child’s life are the most important,” the Chancellor said as he moved onto the government’s spending plans for childcare and education. Mr Sunak therefore announced additional funding to support young families, help schools recover from the pandemic and improve education across the UK, including: 

  • £300m for the ‘Start for Life’ scheme to fund Family Hubs, perinatal mental health support, breastfeeding services and parenting programmes
  • An extra £200m for the Supporting Families Programme
  • An additional £170m for childcare providers by 2024-25
  • £150m to support training and development for early years workers
  • £200m per year to continue the holiday activities and food programme for disadvantaged children
  • An extra £4.7bn for schools by 2024-25, restoring real-terms investment in schools to 2010 levels
  • A £1.8bn package across the Spending Review period to help schools and colleges recover from the effects of the pandemic
  • £2.6bn provision for children with Special Educational Needs and Disabilities (SEND), to help fund 30,000 new places, improve existing buildings and add new facilities
  • £560m for the new Multiply programme to improve basic maths skills among UK adults.

Housing

In his speech, Mr Sunak commented, “We are investing more in housing and homeownership with a multi-year settlement totalling nearly £24bn.” This includes £1.8bn of funding announced in this Budget (helping meet the government’s commitment to £10bn for new housing) to be spent on housing developments on brownfield land. The Chancellor also reconfirmed the government’s £11.5bn investment in the Affordable Homes Programme (2021-26) to deliver 180,000 units.

He pledged £5bn for the removal of unsafe cladding from high-risk buildings, to be partly funded by the Residential Property Developer Tax, which will be levied at a rate of 4% on profits in excess of a £25m threshold.

Other key points

  • Green measures include – £3.9bn to decarbonise buildings, including £1.8bn to support low-income households to make the transition to net zero while reducing their energy bills
  • Community – 20,000 new police officers, an extra £2.2bn for courts and rehabilitation facilities and £3.8bn for prison-building
  • R&D investment – £20bn by 2024-25
  • Alcohol duty reform – the planned increase in alcohol duty that was due to take effect from midnight on Budget Day will be cancelled. A new five-point plan, which takes effect in 2023, will restructure duty to tax drinks in direct proportion to their alcohol content (including a new ‘Draught Relief’ policy set to cut duty on beer and cider sold in pubs). Consultation will close on 30 January 2022
  • Tobacco duties – duty rates on all tobacco products increased by RPI+2% from 6pm on Budget Day
  • Fuel duty rates – frozen UK-wide for the 2022/23 tax year
  • Company vehicles – from 6 April 2022, the van benefit charge and the car and van fuel benefit charges will increase in line with CPI
  • Tonnage Tax reform –  a package of measures to reform the UK’s Tonnage Tax regime will be introduced from April 2022
  • Aviation tax reform – from 1 April 2023 a new domestic band for Air Passenger Duty (APD) will be introduced. For 2023-24, the economy rate for the domestic band will be set at £6.50 and rates for the short and long-haul bands will increase in line with RPI. A new ultra-long-haul rate will be introduced
  • Capital Gains Tax (CGT) property payment window – from Budget Day the deadline for residents to report and pay CGT (where applicable) after selling UK residential property increases from 30 days after the completion date to 60 days.

Closing comments

Rishi Sunak signed off his announcement saying, “This Budget helps with the cost of living. This Budget levels up to a higher-wage, higher-skill, higher-productivity economy. This Budget builds a stronger economy for the British people. And I commend it to the House.”

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

All details are believed correct at the time of writing (27 October 2021)

News in Review

 “Growth is being accompanied by an unprecedented rise in inflationary pressures”

A closely monitored survey, released last week, suggests the UK economy unexpectedly regained momentum during October. The preliminary reading of the IHS Markit/CIPS Composite Purchasing Managers’ Index (PMI) rose to 56.8, up from 54.9 in September. This represents the largest monthly increase since May and beat the consensus forecast in a Reuters poll of economists which had predicted a decline to 54.0.

Commenting on the findings, IHS Markit Chief Business Economist Chris Williamson said the economy “picked up speed again in October”, although he did strike a note of caution adding, “the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases.”

Mr Williamson also noted that the Index reported the fastest rate of input price inflation since its inception in 1998, fuelled by higher wages and supply shortages. He concluded, “Growth is being accompanied by an unprecedented rise in inflationary pressures, which will inevitably feed through into higher consumer prices.”

Inflation likely to hit 5%

The latest PMI data has added to speculation that the Bank of England (BoE) will soon need to raise interest rates to guard against inflationary expectations becoming entrenched. In comments published in last Thursday’s Financial Times, the BoE’s new Chief Economist Huw Pill, warned inflation is likely to hit 5% in the coming months and said the question of whether to raise rates would be a “live” one when the Monetary Policy Committee (MPC) next convenes on 4 November.

Mr Pill said, “I would not be shocked — let’s put it that way — if we see an inflation print close to or above 5%. And that’s a very uncomfortable place for a central bank with an inflation target of 2% to be.” However, the Chief Economist described November’s MPC decision as “finely balanced” and was at pains not to suggest any need to move rates much higher than their pre-pandemic level of 0.75%.

State Pension rise

Last Wednesday’s announcement that inflation, as measured by the Consumer Prices Index (CPI), had risen by 3.1% in the year to September, means retirees now know by how much the State Pension will increase from next April. Following the government’s decision to suspend its triple lock guarantee for one year, September’s CPI rate will be used to calculate the uplift. As a result, the value of the basic State Pension will increase in April 2022 from £137.60 to £141.85 per week, while the full new State Pension will rise from £179.60 to £185.15 per week.

Retail sales down again

Official data released last Friday showed retail sales unexpectedly fell for the fifth successive month, with volumes down 0.2% in September. Although sales volumes remain above pre-pandemic levels, this latest fall marks the longest consecutive run of monthly declines since records began in 1996.

Responding to the data, British Retail Consortium Chief Executive, Helen Dickinson said, “Retailers will be concerned by the slump in sales, just as they begin their preparations for the all-important Christmas period. Fuel shortages, wet weather, and low consumer confidence all contributed to lower consumer demand, with household goods, furniture and books all hit particularly hard.”

Public borrowing lower than expected

The latest public sector finance statistics, released last Thursday, showed that government borrowing remains on a downward trajectory. Total borrowing across the first six months of the current financial year fell to £108.1bn, over £100bn less than the figure recorded during April-September 2020. While this is still more than triple the pre-pandemic level, borrowing this year has fallen more quickly than economists expected, which will give the Chancellor some room for manoeuvre when he delivers his Budget and Spending Review in the Commons this afternoon.

Pre-Budget announcements

Perhaps unsurprisingly, the news agenda for the last seven days also featured intense speculation about the Budget’s likely content. In addition, much to the Commons Speaker’s annoyance, there were also several pre-Budget briefings, including Treasury statements setting out spending plans for transport, health and education, details of an increase in the National Living Wage to £9.50 per hour and a lifting of the year-long public sector pay freeze.

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.

Humble mortgage overpayments add up

A boost in UK savings as a result of reduced expenditure on travel and leisure during lockdown could be the key to cutting thousands in interest and months from the terms of mortgages, according to research1.

With Bank of England figures suggesting Brits saved an extra £200bn during lockdown, overpaying on your mortgage could prove more fruitful than squirrelling away this cash into low interest savings accounts.

Overpayment benefits

It is estimated that fewer than half of people take advantage of overpayments, despite most mortgages allowing borrowers to overpay on either a regular or ad hoc basis without penalty. Yet paying an extra £90 a month towards a £200,000 mortgage from the first payment onwards would reduce the loan’s total cost by more than £16,800 and the term by more than three years, says the data.

Overpayments don’t have to start early in the mortgage to make a noticeable impact either. Paying an extra £90 each month from the mortgage’s 10th anniversary could still save £5,300 in interest and shave 18 months off the term.

Mortgage overpayments won’t be suitable for everyone, however, and you should consider your personal and financial circumstances first.

1Halifax, 2021

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

Working together to tackle the climate crisis

Due to be held this November in Glasgow, the United Nations 26th Conference of the Parties – COP26 – is recognised as the most important climate change event since the 2015 Paris Agreement. The summit will bring together world leaders to build on the work left unfinished by COP25.

Countries are being asked to co-operate to reduce emissions, with the aim of achieving global net zero by mid-century, as well as mobilising finance, and protecting natural habitats and communities.

The investment industry has stated its intention to play a vital role in the global climate transition. Launched in December, the Net Zero Asset Managers Initiative has grown to over 120 investors, managing $43trn – all committed to supporting the goal to reach net zero and investments aligned with net zero emissions. COP provides an opportunity for investors to consider how they can innovate in developing solutions to solve climate issues and in financing sector transition.

Institutional Investors Group on Climate Change CEO, Stephanie Pfeifer, commented on the popularity of the initiative, “In just six months nearly half of the global asset management sector has committed to achieving net zero emissions with their clients across the funds they manage. This marks a fundamental tipping point across the investment sector and a significant boost in efforts to tackle climate change and decarbonise the global economy. There’s a lot more to achieve, but the sector is increasingly on a path to a net-zero future.”

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

Home Finance – In the news

Rising interest in equity release

More than half of homeowners are interested in releasing equity from their property in later life1, with the majority aiming to boost pension income and savings or pay for care. The amount of equity available for release in British homes has also reached a record high of £730bn2, with the South East having the largest available equity by region at £140bn.

Biggest homebuyer turnoffs

Subsidence, Japanese knotweed, overgrown gardens and visible power lines are some of the biggest homebuyer red flags which could knock up to 20% off the value of your home3. Subsidence is the biggest cause for concern, with the potential to reduce the value of a home by £51,000 for the average UK property. Japanese knotweed can knock 15% (£38,000) off the value, unkempt gardens 14% (£36,000) and new power lines 13% (£33,000).

Continued demand for specialist mortgages

Mortgage options suitable for irregular incomes and repayment blemishes continue to be sought after4, with demand for lenders willing to consider satisfied repayment defaults remaining in the top three most desired criteria points. Searches for unsecured arrears and unsatisfied defaults appeared in the top 15 most searched-for terms, while searches for borrowers with bankruptcy jumped 24%.

1Equity Release Council, 2021

2Canada Life, 2021

3Yes Homebuyers, 2021

4Legal & General, 2021

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.

Residential Property Review – October 2021

Supply still lagging demand

Steady buyer demand and a sixth successive month of net negative new instructions, were the stand-out trends in the September UK Residential Market Survey published by the Royal Institution of Chartered Surveyors (RICS).

At the national level, new buyer enquiries had a net balance of zero in September, up from -13% in August. Meanwhile, the recent decline in new listings persisted, with new instructions registering a net balance of -35%.

Simon Rubinsohn, RICS Chief Economist, commented, “The imbalance between demand and supply remains the most striking theme… And feedback from members provides little reason to believe this issue will be resolved anytime soon.”

Following a slight dip caused by the tapering of the Stamp Duty holiday, steadier buyer demand is now causing sales expectations to gain momentum, with 11% more respondents anticipating an increase in sales in the coming three months, up from +6% in August.

Indeed, with over one million homes sold by the end of August – a threshold not usually passed until October – analysts are suggesting 2021 could see more transactions completed than in any year since the global financial crisis.

Rents surge nationwide

The rental market is springing back to life, with the return of renters to cities forcing rents higher, and the number of rental homes struggling to keep pace with the surge in tenant demand.

In London, the bounce back gathered pace in September, with quarterly average rental values rising by the largest amount in a decade in both prime central (+2.8%) and prime outer London (+2.6%). Prices are being driven by an imbalance between tenant demand and new available rental properties, as offices re-open and more overseas tenants start to arrive.

Meanwhile, rents outside London are rising at their fastest rate since 2008. The average price of renting a home outside the capital is now £790 a month, a 5% increase year-on-year. Two cities topped the rankings – Sheffield (7.6%) and Bristol (6.9%).

Transport links key for house hunters

The return of workers to the office after more than a year of home working has sparked a significant increase in interest for homes near commuter train stations.

Buyer searches have surged in commuter areas, according to Rightmove. Indeed, data from its website show eight of the top 10 stations that have seen heightened interest from potential homebuyers are all within one hour’s train commute from a major city.

Top of the list is Chelmsford station, which saw a 107% increase from June to August. In the same period, Crewe, just under an hour from Birmingham, saw a rise of 32%.

Rightmove’s Tim Bannister commented, “While the demand to relocate or search for more space has by no means gone away, the numbers suggest that this will need to be balanced with easy transport access on office days, which has understandably been lower on the agenda for many over the last eighteen months.“

“At the national level, new buyer enquiries had a net balance of zero in September, up from -13% in August“

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House Prices Headline statistics

House Price Index (August 2021)* 138.6*

Average House Price £264,244

Monthly Change 2.9%

Annual Change 10.6%

*(Jan 2015 = 100)

  • Average house prices in the UK increased by 10.6% in the year to August 2021
  • On a non-seasonally adjusted basis, average house prices in the UK increased by 2.9% between July and August 2021
  • House price growth was strongest in Scotland where prices increased by 16.9% in the year to August 2021.

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House Prices Price change by region

Region   Monthly Change (%) Annual Change (%) Average Price (£)
England   3.2 9.8 £280,921
Northern Ireland
(Quarter 2 – 2021)		 2.9 9.0 £153,449
Scotland 1.7 16.9 £180,832
Wales   2.8 12.5 £194,575
East Midlands 2.7 10.3 £221,693
East of England 2.9 9.6 £324,510
London 5.6 7.5 £525,893
North East 2.4 13.3 £149,042
North West 4.5 12.4 £194,821
South East 1.9 8.7 £358,070
South West 4.2 8.9 £288,658
West Midlands Region 2.9 11.0 £228,593
Yorkshire & The Humber 1.5 8.8 £185,968

Source: The Land Registry
Release date: 20/10/21 Next data release: 17/11/21

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Average monthly price by property type – August 2021

Property Type Annual Increase
Detached
£411,649		 13.1%
Semi-detached
£254,115		 11.0%
Terraced
£214,083		 9.9%
Flat / maisonette
£220,756		 7.3%

Source: The Land Registry
Release date: 20/10/21

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Housing market outlook


“We expect the market to remain busy compared to historical norms, and for price growth to remain in firmly positive territory at the end of the year, although lower than current levels of +6.1%. Stock levels will start to rebuild in early 2022 as market activity returns to more normal levels.“

Gráinne Gilmore, Head of Research at Zoopla
Source: Zoopla October 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 (21 October 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 – October 2021

Strong recovery for UK flex market

According to Workthere research, the flexible office sector regained momentum in H1 2021 following its pandemic-induced slump, with renewed appetite for flex space in both enquires (+30% on pre-pandemic levels) and transactions (+36%).

Flexible workplaces – a catchall term encompassing anything from serviced offices to fitted plug and play space – make up a significant part of the office landscape, with 12% of UK office workers expected to be using flexible workplaces at least some of the time after the pandemic subsides.

Nationally and globally, the provision of flex space remains weighted towards private offices (50%), with co-working desks (34%) and communal areas (13%) the next most popular uses. In recent years, the sectors choosing flex space have evolved. Tech has traditionally been the most active, but insurance and financial, business and consumer, and professional services collectively accounted for almost half of desks this year.

This sectorial shift has also impacted the average size of occupier requirements. From 11 desks pre-pandemic, the average size per transaction is now 17 desks. Likewise, the number of companies taking licences of one year or more is 44% higher than before the pandemic.

Strongest capital growth for a decade

The latest UK Monthly Index Snapshot from commercial real estate services and investment firm CBRE showed capital growth in Q3 2021 was the strongest since Q1 2010.

Capital values increased by 1.6% across all UK commercial property in September, the highest capital growth figure since June 2014. The industrial sector reported record-breaking month-on-month growth of 3.1%, which pushed its Q3 figure to the strongest on record (7.5%). Monthly retail capital growth (1.7%) and office capital growth (0.5%) also increased.

Rental values for all sectors posted 0.3% growth in September, led by industrial rental values which rose by 0.8%. Total returns for the month were 2.0%, with readings of 3.4%, 2.2% and 0.8% for the industrials, retail and office sectors respectively.

New investment in world-leading science park

Magdalen College Oxford and GIC, a Singapore-based global investor, have entered into a strategic partnership to accelerate development of The Oxford Science Park (TOSP), a key location for science and technology firms.

The partnership aims to accommodate strong demand and future growth of its world-leading companies. Current occupiers include Exscientia, inventors of the world’s first AI-designed drugs to enter clinical trial, and Vaccitech, the company behind the Oxford AstraZeneca vaccine.

Planned state-of-the-art facilities include Plot16, a 15,600 sq.m eco-friendly development that will deliver office and lab space in two buildings divided by a raised central plaza. Construction is set to get underway by the end of the year, with strong interest already recorded in subsequent buildings.

Rory Maw, Chief Executive of TOSP, commented, “As well as being an enormous demonstration of confidence in the UK as a leading location for international life science and technology, this is a transformational investment… It enables us to meet unprecedented demand for high-quality laboratory and office space and to support the ambitious growth of new and existing occupiers.“

Nationally and globally, the provision of flex space remains weighted towards private offices (50%), with co-working desks (34%) and communal areas (13%) the next most popular uses

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Commercial property currently for sale in the UK

  • Regions with the highest number of commercial properties for sale currently are the South West and North West England
  • Northern Ireland currently has the lowest number of commercial properties for sale (27 properties)
  • There are currently 1,396 commercial properties for sale in London, the average asking price is £1,603,443.

Region No. properties AVG. asking price
London 1,396 £1,603,443
South East England 1,222 £2,038,093
East Midlands 742 £969,844
East of England 763 £639,422
North East England 770 £325,875
North West England 1,399 £399,062
South West England 1,560 £604,450
West Midlands 1,099 £485,440
Yorkshire and The Humber 1,126 £299,789
Isle of Man 53 £484,118
Scotland 1,134 £325,907
Wales 781 £407,393
Northern Ireland 27 £678,133

Source: Zoopla, data extracted 21 October 2021

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Leisure market recovery in the offing

The most recent UK Leisure Spotlight report from Savills has highlighted that during August, total UK leisure spend increased 6.4% above 2019 levels. Sector growth can be attributed to the volume of staycations and day trips. With total leisure and hospitality spend returning to positive territory, commercial property closures across the sector have reduced considerably when compared with last year.

Key points from the report:

  • The food and beverage sector is experiencing strong growth, with drive-thru and takeaway sub-sectors growing at pace
  • The number of out-of-town gyms has risen, as operators expand their presence across retail parks
  • Cinema admissions have increased, August admissions were 67% higher than August 2019
  • Pubs, bars and clubs saw a return to sales growth in August
  • UK leisure sector vacancy rates are expected to remain far below that of the retail market (11.8% versus 16.5%), this indicates ‘comparatively robust levels of demand.‘

Head of UK Retail at Savills, Alan Spencer, commented on the findings, “It’s no secret that the leisure sector has faced a series of challenges that we couldn’t have comprehended only two years ago. However, the market turned a corner over the summer and we’re now seeing requirements from operators across the entire sector, from traditional operators such as bars and restaurants to new competitive socialising concepts and immersive, interactive experiences.“

All details are correct at the time of writing (21 October 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

‘Global cooperation is key to addressing our shared challenges as we emerge from the pandemic’

Chancellor Rishi Sunak stressed the importance of nations working together to tackle supply chain issues at a meeting of G7 (Group of Seven) nations in Washington last week. The meeting of finance ministers and central bank governors discussed the importance of ensuring that global supply chains become more resilient.   

Mr Sunak’s statement read, ‘Global cooperation is key to addressing our shared challenges as we emerge from the pandemic. From global tax reform to global supply chains, we must work together to seek international solutions for the benefit of our citizens at home.’

Supply chain problems were evident at the Port of Felixstowe last week. The port, which handles 36% of the UK’s freight container traffic, reported a logjam of shipping containers, due to a combination of driver shortages and ongoing effects of the pandemic in the busy run up to Christmas. Meanwhile, President Biden announced plans to keep the Port of Los Angeles open “24 hours a day, seven days a week,” to relieve pressure on an overworked supply chain that has grown into a major economic problem for the US.

G7 presents a roadmap for systemic economic reform

In a report entitled ‘Global Economic Resilience: Building Forward Better’, published on 13 October, the G7 Economic Resilience Panel set out a roadmap detailing how the G7 nations should work together to identify and manage emerging risks or coercion. Lord Sedwill, Chair of the Panel, said, “Economic resilience is delivered by diversification, co-dependence and public-private partnerships within well-governed, open and integrated global markets.” 

Bank of England will act on inflation

On Monday, the Bank of England Governor, Andrew Bailey hinted that UK interest rates may have to rise but gave no indication of when the Bank might increase rates. Mr Bailey said surging energy prices are another signal that the Bank will “have to act.” The next rate setting Monetary Policy Committee (MPC) meeting is scheduled for 4 November.

Office for National Statistics (ONS) figures released first thing on Wednesday morning show that the Consumer Prices Index (CPI) rose by 3.1% in the 12 months to September 2021.

UK economy grows on dining out and camping

August saw people taking advantage of the first full month of COVID freedoms, boosting the UK economy by 0.4%. This is according to ONS figures released last week, which revealed that the service sector made the most significant contribution to economic growth, growing by 9%, while activity in hotels and campsites grew by 22.9%.

Growth, however, continues to be underscored by concerns about ongoing supply chain disruption and labour shortages. Darren Morgan, Director for Economic Statistics at the ONS, commented, “The economy picked up in August as bars, restaurants and festivals benefited from the first full month without COVID-19 restrictions in England. However, later and slightly weaker data from a number of industries now mean we estimate the economy fell a little overall in July.”

Global Investment Summit

The UK’s Global Investment Summit began on Tuesday at London’s Science Museum, with the Prime Minister announcing 18 new trade and investment deals worth £9.7bn, which will support green growth and create an estimated 30,000 UK jobs. One such deal sees the UK government partnering with Bill Gates in new technology to reduce emissions. Boris Johnson said, “This is just the start. We will see new partnerships for green growth forged at today’s Global Investment Summit, as we look ahead to COP26 and beyond.”

Market update

With commodity issues weighing on global markets, investors continue to anticipate inflationary pressures, amid labour shortages and supply chain issues. As speculation intensified around the chances of a potential UK interest rate hike, the FTSE 100 and 250 drifted lower on Monday, but repaired any losses on Tuesday as investors digested signs of a robust start to the latest earnings season.

National Bureau of Statistics figures released on Monday, show that during Q3, China’s economy expanded by 4.9%, the nation’s weakest pace since Q3 2020. Significantly slower than the 7.9% rise in Q3, and below analyst expectations of a GDP 5.2% increase. The weak expansion news sent Asian stock markets momentarily lower as concerns about the world economic recovery returned to the fore.

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.

Money – In the news

A third enter retirement in debt

Retirement. You’ve paid off your mortgage, said goodbye to your colleagues for the last time and now it’s finally time to put your feet up and enjoy some well-deserved rest, free of commitments. That’s the ideal, anyway. Unfortunately, many retirees enter this stage of their lives with significant commitments hanging over their head, with research1 finding that a third of people now retire in debt. Worse still, 2021 retirees owe around a fifth more than last year’s cohort – around £20,650 on average. Forty percent have credit card debt, 31% still have outstanding mortgage payments, 17% are in their overdraft, while 8% have borrowed from family and friends.

IHT bills up year-on-year

Data2 published by HMRC has revealed that estates paid £5.4bn in Inheritance Tax (IHT) in the 2020-21 tax year – £0.2bn (nearly 4%) up on 2019-20. Each year, over 20,000 estates are liable for IHT, but there are ways to keep your estate under the nil-rate threshold or at least minimise your liability.

Triple lock changes for 2022-23

After much speculation, in September, Secretary of State for Work and Pensions, confirmed suspension of the average earnings component of the pension triple lock, to avoid a disproportionate rise of the State Pension following the pandemic. For the 2022-23 tax year only, the new and basic State Pension will increase by the higher of either 2.5% or the consumer rate of inflation.

National Insurance and dividend tax rises

A new health and social care tax will be introduced across the UK from April 2022. The tax will initially begin as a 1.25 percentage point increase in National Insurance, paid by both workers and employers. From April 2023, it will become a separate tax on earned income, calculated in the same way as National Insurance and ring-fenced as a health and social care levy. Tax on share dividends is also scheduled to increase by 1.25 percentage points.

1Key, 2021

2HMRC, 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. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.

Wealth – In the news

ESG assets will exceed £36.5trn by 2025

ESG assets are forecast to exceed £36.5trn – over a third of projected global assets – by 2025, according to Bloomberg Intelligence1. The analysis comes as environmental, social and governance factors are becoming increasingly important to investors across the globe.

Adeline Diab, Head of ESG and Thematic Investing EMEA & APAC at Bloomberg Intelligence, said, “The pandemic and the global race to net zero carbon emissions have put ESG criteria into orbit – from niche to mainstream to mandatory.”

Significant recovery for UK dividends in Q2

UK dividends rose by 51% in the three months to June 2021, jumping to £25.7bn on a headline basis2. Almost 90% of the increase, when compared to Q2 2020, can be attributed to firms restarting dividends. The increase was significantly ahead of an expected rise of 31%.

Income rich, cash poor

Research3 has revealed that 23% of households with an income of £100,000 would be unable to cover a major unexpected bill or survive more than three months without their income. The same is true for over one in ten households earning over £150,000. Although high earners have more coming in each month, in turn, they tend to have more outgoings, which can make saving difficult. However, the importance of having emergency funds should not be overlooked – it is essential for improving your resilience to financial shocks.

1Bloomberg Intelligence, 2021

2Link Group, 2021

3hl, 2021

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