economy Archives

Economic review – November 2024: Gradual shifts amid growing challenges

Posted on 3 December 202428 March 2025 by Sophie Soraf

Interest rates set to fall more gradually

Last month, the Bank of England (BoE) cut interest rates for only the second time since 2020 but also warned future reductions were likely to be more gradual due to the prospect of inflation creeping higher next year.

Following its latest meeting, which concluded on 6 November, the BoE’s nine-member Monetary Policy Committee (MPC) voted by an 8-1 majority to reduce rates by 0.25 percentage points, bringing the Bank Rate down to 4.75%.

Commenting after announcing the news, BoE Governor Andrew Bailey suggested rates were likely to “continue to fall gradually from here”. However, he did caution that they would not be reduced “too quickly or by too much.” Mr Bailey was also at pains to emphasise the word “gradual” and added that the reason for such an approach was that “there are a lot of risks out there in the world at large and also domestically.”

Alongside the rate announcement, the governor unveiled the BoE’s latest economic forecast, which takes into account the Chancellor’s budget measures. The updated projections suggest the policies announced in the Budget are likely to boost the headline rate of inflation by almost half a percentage point at its peak in just over two years’ time and result in it taking a year longer for inflation to return to the Bank’s 2% target level.

The latest inflation data published by the Office for National Statistics (ONS) two weeks after the MPC announcement revealed that the annual headline rate jumped from 1.7% in September to 2.3% in October. While this sharp increase was largely driven by October’s energy price hike, the figure did come in slightly ahead of analysts’ expectations. This overshoot, combined with the Governor’s comments, has undoubtedly increased the prospect of interest rates remaining unchanged following the MPC’s final meeting on 19 December.

UK economy losing momentum

ONS released gross domestic product (GDP) statistics last month showing the economy barely grew between July and September, while more recent survey evidence points to a further loss of economic momentum.

The latest GDP figures revealed that UK economic output rose by just 0.1% across the whole of the third quarter. This figure was weaker than economists had expected and represents a sharp slowdown from the 0.5% growth rate recorded during the second quarter of the year.

A monthly breakdown of the data also showed the economy actually contracted by 0.1% during September alone, with ONS reporting a significant drop in manufacturing output while the services sector flatlined. A number of economists blamed September’s weakness on Budget uncertainty which was felt to have impacted the behaviour of both firms and households.

Data from a recently released economic survey also suggests business optimism continued to slide in the weeks following October’s Budget. Indeed, the flash headline growth indicator from the S&P Global/CIPS UK Purchasing Managers’ Index (PMI) fell to 49.9 in November from 51.8 in October, the first time in 13 months the figure had dipped below the 50 threshold, denoting a contraction in private sector output.

S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The first survey on the health of the economy after the Budget makes for gloomy reading. Although only marginal, the downturn in output represents a marked contrast to the robust growth rates seen back in the summer and are accompanied by deepening concern about prospects for the year ahead.”

Last month also saw the BoE publish revised economic growth projections. While the Bank did trim this year’s forecast from 1.25% to 1.0%, it is now predicting a stronger 2025, with next year’s projected growth figure upped to 1.5% from a previous forecast of 1.0%.

Markets (Data compiled by TOMD)

At the end of November, investors closely monitored the threat of possible US tariffs and the ongoing political turmoil in France. On the last trading day of the month, European markets closed slightly higher as inflation estimates met expectations, while the FTSE 100 was flat. Meanwhile, across the Atlantic, US stocks tempered from record highs reached earlier in the week.

In the UK, the FTSE 100 index closed the month on 8,287.30, a gain of 2.18%, while the FTSE 250 closed November 1.88% higher on 20,771.57. The FTSE AIM closed on 732.49, a loss of 0.63% in the month. The Euro Stoxx 50 closed November on 4,804.40, down 0.48%. In Japan, the Nikkei 225 closed the month on 38,208.03, a monthly loss of 2.23%.

In the US, President-elect Donald Trump has outlined plans to place levies on imports from Canada, Mexico and China, with concerns that his plans could extend to other regions. The Dow Jones closed November up 7.54% on 44,910.65, while the tech-orientated NASDAQ closed the month up 6.21% on 19,218.17.

On the foreign exchanges, the euro closed the month at €1.20 against sterling. The US dollar closed at $1.26 against sterling and at $1.05 against the euro.

Brent crude closed November trading at around $68 a barrel, a loss over the month of 5.40%. Oil prices fluctuated at month end as speculation over OPEC+’s production plans heightened in advance of their December meeting. Gold closed the month trading at around $2,683 a troy ounce, a monthly loss of 1.84%.

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Index	Value	Movement since 31/10/24
FTSE 100	8,287.30	+2.18%
FTSE 250	20,771.57	+1.88%
FTSE AIM	732.49	-1.63%
Euro Stoxx 50	4,804.40	-0.48%
NASDAQ Composite	19,218.17	+6.21%
Dow Jones	44,910.65	+7.54%
Nikkei 225	38,208.03	-2.23%

Unemployment rate rises

Official figures published last month revealed a rise in the rate of unemployment, although ONS has warned that the data should be treated with some caution due to smaller survey sample sizes increasing data volatility.

The latest ONS labour market release showed the unemployment rate stood at 4.3% between July to September 2024; this compares to 4.0% for the previous three-month period. The data also revealed that the number of payrolled employees decreased by 9,000 in the three months to September, with early estimates suggesting the figure dropped by a further 5,000 in October.

Job vacancies also fell again, with 35,000 fewer reported in the August–October period compared to the previous three months. Overall, the statistics agency said that the latest batch of data points to a ‘continued easing of the labour market.’

ONS is currently in the process of overhauling the statistical methodology used to calculate its labour market figures – research released last month by the Resolution Foundation highlighted the current problems surrounding data reliability. According to the think tank’s analysis of tax office, self-employment and new population data, the official statistics may currently be failing to count as many as a million people who are believed to be in work.

Retail sales fall by more than expected

The latest official retail sales figures showed sales volumes declined ahead of October’s Budget, while more recent survey data points to ‘disappointing’ sales in November, too.

Figures released last month by ONS revealed that retail sales volumes fell by 0.7% in October, following a period of growth across the previous three months. While analysts had predicted a sales dip, October’s decline was larger than expected. ONS said the fall was driven by a ‘notably poor month for clothing stores’ but also noted that retailers across the board reported consumers holding back spending ahead of the Budget.

Data from GfK’s latest consumer confidence index did offer the retail sector some cheer, though, with the long-running survey reporting less pessimism post-Budget. November’s headline figure rose to its highest level since August, with growth recorded across all five components of the survey, suggesting consumers may have more appetite for spending in the run-up to Christmas.

November’s CBI Distributive Trades Survey, however, found retailers expect trading conditions to remain tough. While the survey did acknowledge ‘some improvement’ in the retail environment since the middle of the year, it also reported ‘disappointing sales’ in November with volumes expected to remain below seasonal norms in December too.

All details are correct at the time of writing (2 December 2024)

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.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited which is regulated and authorised by the Financial Conduct Authority—registered number 211314.

Tees Financial Limited is registered in England and Wales—registered number 4342506.

Economy set for short term Budget boost

Posted on 4 November 202428 March 2025 by Sophie Soraf

Economic review October 2024

New economic projections produced by the Office for Budget Responsibility (OBR) suggest the Labour administration’s first Budget will provide only a ‘temporary boost’ to UK economic output.

Chancellor Rachel Reeves revealed the independent fiscal watchdog’s latest forecast during her Autumn Budget delivered to the House of Commons on 30 October. The updated figures predict the economy will expand by 1.1% this year and 2.0% in 2025, slightly higher than the OBR’s March forecast, with growth then falling back across the remainder of this Parliament. The OBR concludes that the Budget’s overall impact will leave ‘the level of output broadly unchanged at the forecast horizon.’

Before the Budget, the latest monthly gross domestic product (GDP) data released revealed that the UK economy returned to growth after two consecutive months of stagnation. The Office for National Statistics (ONS) figures showed the economy expanded by 0.2% in August, with all major sectors posting some growth. Despite August’s pick up, ONS warned that the broader picture in recent months was one of ‘slowing growth’ compared to the year’s first half.

This loss of momentum was also highlighted in the latest S&P Global/CIPS UK Purchasing Managers’ Index (PMI), with its preliminary headline growth indicator falling to 51.7 in October from 52.6 the previous month. While remaining above the 50 threshold that denotes expansion in private sector output, this latest reading was the lowest since last November.

Commenting on the survey, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “Business activity growth has slumped to its lowest for nearly a year in October as gloomy government rhetoric and uncertainty ahead of the Budget dampened business confidence and spending. The early PMI data are indicative of the economy growing at a meagre 0.1% quarterly rate in October.”

UK inflation falls sharply

Official consumer price statistics released last month revealed a larger-than-expected fall in inflation, potentially paving the way for further interest rate cuts in the coming months.

ONS data showed the annual headline rate of inflation dropped from 2.2% in August to 1.7% in September. The fall, which took the rate to its lowest level since April 2021, was primarily driven by lower airfares and petrol prices.

The decline was more significant than economists had anticipated, with the consensus forecast in a Reuters poll predicting a September reading of 1.9%. It also took the figure decisively below the Bank of England’s (BoE) 2% target, and further fuelled market expectations for more interest rate cuts this year.

Last month, however, two of the BoE’s nine-member rate-setting Monetary Policy Committee (MPC) advocated the continuation of a cautious approach to monetary easing. Megan Greene, for instance, suggested volatile components had driven September’s sharp inflation fall and again stated her preference for rate cuts to be gradual, while Catherine Mann said the cooling of price growth still had “a long way to go” for the Bank to hit its 2% target over the medium term.

In early October, though, BoE Governor Andrew Bailey (another MPC member) told the Guardian that, provided there was further welcome news on the inflation front, he felt the Bank could become “a bit more aggressive” in its rate-cutting approach. In a recent Reuters survey, 72 economists said they believe a quarter-point rate reduction would be announced after this month’s MPC meeting on 7 November.

Market expectations for the speed of monetary easing over the coming 12 months, however, eased back after the Budget, as the Chancellor’s big spending plans raised fears of a pick-up in inflationary pressures next year.

Markets (Data compiled by TOMD)

UK indices moved lower on the last day of October as markets continued to digest the Budget announcement, during which Chancellor Rachel Reeves unveiled £40bn of tax rises. On 31 October, the Institute for Fiscal Studies (IFS) warned about the likelihood of further tax rises following the Budget.

The FTSE 100 index closed October on 8,110.10, a loss of 1.54%, while the mid cap focused FTSE 250 closed the month 3.16% lower on 20,388.96. The FTSE AIM closed on 737.10, a loss of 0.45% in the month. The Euro Stoxx 50 closed the month on 4,827.63, down 3.46%. At month end, the Bank of Japan retained interest rates at their ultra-low level as it monitors global economic developments and potential risks to domestic recovery. The Nikkei 225 closed October on 39,081.25, a monthly gain of 3.06%.

With voters poised to take to polling stations stateside, robust economic data at month end confused the backdrop for imminent Federal Reserve rate cuts, as US stocks and government bonds fell. The Dow Jones closed the month down 1.34% on 41,763.46. The tech-orientated NASDAQ closed the month down 0.52% on 18,095.15.

On the foreign exchanges, the euro closed the month at €1.18 against sterling. The US dollar closed at $1.28 against sterling and at $1.08 against the euro.

Gold closed October trading at $2,734.15 a troy ounce, a monthly gain of 3.96%. Towards the end of the month, the precious metal traded higher as demand surged ahead of Diwali and the US election; uncertainty over the election outcome has made investors focus on the safe haven asset. Brent crude closed the month trading at $72.62 a barrel, a gain over the month of 1.35%. Oil prices stabilised at month end after rallying due to robust fuel demand in the US and reports that OPEC+ may delay an increase in output.

Index	Value (31/10/24)	Movement since 30/09/24
FTSE 100	8,110.10	-1.54%
FTSE 250	20,388.96	-3.16%
FTSE AIM	737.10	-0.45%
Euro Stoxx 50	4,827.63	-3.46%
NASDAQ Composite	18,095.15	-0.52%
Dow Jones	41,763.46	-1.34%
Nikkei 225	39,081.25	+3.06%

Retail sales rise for third successive month

Recently published ONS statistics showed that retail sales rose for the third month in a row in September, although more up-to-date survey data does point to a recent slowdown as consumers paused spending ahead of the Budget.

The latest official retail sales figures revealed that total sales volumes rose by 0.3% in September, with ONS saying tech stores were the main driver of growth, reflecting a sales boost from the new iPhone launch. September’s growth defied economists’ expectations for a monthly 0.3% decline and, combined with July and August’s strong gains, resulted in sales volumes rising by 1.9% across the whole of the third quarter, the joint largest increase since mid-2021.

More recent survey evidence, however, does suggest consumers became more cautious in the run-up to the Budget. The latest GfK Consumer Confidence index, for instance, found that sentiment fell to a seven-month low in October as concerns over possible tax hikes hit confidence.

Data from last month’s CBI Distributive Trades Survey also points to a recent dip in consumer spending. The CBI noted that retail sales volumes ‘slipped back slightly in October,’ adding that some retailers had highlighted ‘increased consumer caution’ ahead of the Autumn Budget.

More signs of a cooling jobs market

The latest batch of labour market numbers revealed fresh evidence of a softening in the UK jobs market with both an easing in pay growth and a further fall in the overall level of vacancies.

Statistics released by ONS last month showed that average weekly earnings excluding bonuses rose at an annual rate of 4.9% in the three months to the end of August. This figure was down from 5.1% in the previous three-month period and represents the slowest rate of pay growth for over two years.

Adding to signs of a cooling jobs market, the release also revealed another decline in the level of vacancies. In total, ONS said there were 34,000 fewer job vacancies reported between July and September 2024 compared to the previous three-month period; this represents the 27th consecutive monthly fall in the number of vacancies.

Last month also saw a number of recruitment firms report a more recent slowdown. Robert Walters, for instance, noted a pause in jobs market activity in the run-up to the Autumn Budget, while James Reed, CEO of recruitment consultancy Reed, said the UK labour market was experiencing “a slow-motion car crash” with firms lacking the confidence to hire new staff.

All details are correct at the time of writing (1 November 2024)

Tees Financial Limited is registered in England and Wales. Registered number 4342506.

Economic Review May 2024

Posted on 27 June 202428 March 2025 by Sophie Soraf

UK growth rate at a two-year high

Last month’s release of first-quarter gross domestic product (GDP) statistics confirmed that the UK economy has exited the shallow recession it entered during the latter half of last year. Survey evidence suggests private sector output has expanded over the past two months.

The latest GDP data published by the Office for National Statistics (ONS) showed the UK economy grew by 0.6% from January to March. This figure was above all forecasts submitted to a Reuters poll of economists, with the consensus prediction pointing to a 0.4% first-quarter expansion. It represents the fastest quarterly growth rate since the final three months of 2021.

ONS said that growth was driven by broad-based strength across the services sector, with retail, public transport and haulage, and health all performing well; car manufacturers also enjoyed a particularly good quarter, although construction activity remained weak. In addition, the statistics agency noted that the first-quarter data was likely to have been boosted by Easter falling in March this year compared to April last year.

Data from the closely-watched S&P Global/CIPS UK Purchasing Managers’ Index (PMI) suggests the recovery continued in the second quarter. While May’s monthly release did reveal that the preliminary composite headline Index fell to 52.8 from 54.1 in April, this latest reading was still above the 50 threshold that denotes growth in private sector activity.

Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The flash PMI survey data for May signalled a further expansion of UK business activity, suggesting the economy continues to recover from the mild recession seen late last year. The survey data are consistent with GDP rising by around 0.3% in the second quarter, with an encouraging revival of manufacturing accompanied by sustained, but slower, service sector growth.”

Inflation data dampens early rate cut hopes

Chances of the Bank of England (BoE) sanctioning a June interest rate cut have declined significantly following last month’s smaller-than-expected drop in the rate of inflation.

Following its latest meeting, which concluded on 8 May, the BoE’s Monetary Policy Committee (MPC) voted by a seven-to-two majority to leave the Bank Rate unchanged at 5.25%. The two dissenting voices, however, both preferred a quarter-point reduction, and comments made by policymakers after the meeting did appear to suggest a first rate cut since 2020 was edging ever closer.

Speaking just after announcing the MPC’s decision, BoE Governor Andrew Bailey made it clear that the Bank needs to see “more evidence” of slowing price rises before cutting rates. But he once again struck a relatively upbeat note on future reductions, adding he was “optimistic” things were moving in the right direction.

Comments subsequently made by BoE Deputy Governor Ben Broadbent also seemed to be potentially paving the way for rates to be cut soon. Speaking at a central banking conference, Mr Broadbent suggested that if things continued to evolve in line with the Bank’s forecasts, it was “possible” rates could be cut “sometime over the summer.”

Last month’s release of inflation data though appears to have dashed hopes of an imminent cut. Although the headline annual CPI rate did fall sharply – down from 3.2% in March to 2.3% in April, primarily due to a large drop in household energy tariffs – the decline was less than had been expected, with both the BoE and economists polled by Reuters predicting a drop to 2.1%.

The next two MPC announcements are scheduled for 20 June and 1 August. While an August rate cut still appears to be a distinct possibility, most analysts now agree that a June reduction looks increasingly unlikely.

Markets (Data compiled by TOMD)

At the end of May, equities were in mixed territory as new inflation data from the eurozone and the US was digested by investors. Inflation stateside came in as expected, while eurozone data was higher than anticipated, fuelling speculation over the pace of rate cuts in both regions.

In the UK, the FTSE 100 index closed May on 8,275.38, a gain of 1.61% during the month, while the FTSE 250 closed the month 3.83% higher on 20,730.12. The FTSE AIM closed on 805.79, a gain of 5.92% in the month. The Euro Stoxx 50 closed the month on 4,983.67, up 1.27%. In Japan, the Nikkei 225 closed May on 38,487.90, a small monthly gain of 0.21%. At the end of the month, the index traded higher as reports circulated about plans for major investments by government-backed pension funds and other large institutional investors.

Across the pond, at the end of May, newly released government data showed that during Q1, the US economy grew slower than initially estimated, and higher-than-expected jobless claims also weighed on sentiment. The Dow closed May up 2.30% on 38,686.32, meanwhile the NASDAQ closed the month up 6.88% on 16,735.02.

On the foreign exchanges, the euro closed the month at €1.17 against sterling. The US dollar closed at $1.27 against sterling and at $1.08 against the euro.

Brent crude closed May trading at $81.38 a barrel, a loss during the month of 5.69%. The price dipped in May primarily due to concerns over future demand. Gold closed the month trading around $2,348 a troy ounce, a monthly gain of 1.79%.

Index	Value (31/05/2024)	Movement Since 30/04/2024
FTSE 100	8,275.38	+1.61%
FTSE 250	20,730.12	+3.83%
FTSE AIM	805.79	+5.92%
Euro Stoxx 50	4,983.67	+1.27%
NASDAQ Composite	16,735.02	+6.68%
Dow Jones	38,686.32	+2.30%
Nikkei 225	38,487.90	+0.21%

Consumer sentiment continues to rise

Although official retail sales statistics for April did reveal a larger-than-expected decline in sales volumes, more recent survey data does point to an improving consumer outlook as households become more optimistic about their finances.

According to ONS data published last month, total retail sales volumes fell by 2.3% in April, following a 0.2% decline in March. ONS said sales fell across most sectors as poor weather reduced footfall but added that it was confident its seasonally adjusted figures had accounted for the timing of the Easter holidays.

Recently released survey data, though, does point to growing optimism for future retail prospects. For instance, May’s CBI Distributive Trades Survey reported a balance of +8 in its year-on-year sales volumes, measuring after April’s slump to -44. The CBI said May’s rise added to “the swathe of data pointing to an improvement in activity over the near-term” and suggested that falling inflation and continuing real wage growth will contribute to a “healthier consumer outlook.”

Data from the latest GfK consumer confidence index also revealed another rise in consumer sentiment. Indeed, May’s headline figure reached its highest level for nearly two-and-a-half years, as households took an increasingly positive view of their personal finances.

Wage growth remains resilient

Earnings statistics published last month showed that wage growth remains strong despite the recent slowing jobs market, although analysts expect pay growth to moderate over the coming months.

The latest ONS figures show that average weekly earnings, excluding bonuses, rose at an annual rate of 6.0% in the first three months of 2024. This figure was the same as recorded in the previous three-month period, defying analysts’ expectations of a slight dip to 5.9%. After adjusting for CPI inflation, regular pay increased by 2.4% on the year, the largest rise in real earnings for over two years.

A survey released last month by the Recruitment and Employment Confederation suggests earnings growth remained high in April, with pay rates for temporary staff rising at their fastest rate in nearly a year. One factor driving this increase was April’s 9.8% minimum wage rise.

Research recently published by the Chartered Institute of Personnel and Development (CIPD) also found that employer expectations for private sector wage rises remain at the same level as reported three months ago. The CIPD did, though, say they expect employers to adjust their pay plans in the coming months as inflation falls and the labour market continues to slow.

All details are correct at the time of writing (3 June 2024)

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 individually 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 relief from taxation are currently applied or proposed and are subject to change; their value depends on the investor’s individual circumstances. No part of this document may be reproduced without prior permission.

This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited, regulated and authorised by the Financial Conduct Authority and registered number 211314.

Tees Financial Limited is registered in England and Wales and registered number 4342506.

Spring budget 2024 – key points

Posted on 7 March 202428 March 2025 by Sophie Soraf

On 6 March, Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget to the House of Commons declaring it was “a Budget for long-term growth.” The fiscal update included a number of new policy measures, such as a widely-anticipated reduction in National Insurance, abolition of the non-dom tax status and new savings products designed to encourage more people to invest in UK assets. The Chancellor said his policies would help build a “high wage, high skill economy” and deliver “more investment, more jobs, better public services and lower taxes.”

OBR forecasts

During his speech, the Chancellor declared that the economy had “turned the corner on inflation” and “will soon turn the corner on growth” as he unveiled the latest economic projections produced by the Office for Budget Responsibility (OBR). He started by saying that they showed the rate of inflation falling below the Bank of England’s 2% target level in “a few months’ time.” He noted that this was nearly a year earlier than the OBR had forecast in the autumn and said this had not happened “by accident” but was due to “sound money” policies.

The Chancellor also noted that the OBR forecast shows the government is on track to meet both its self-imposed fiscal rules which state that underlying debt must be falling as a percentage of gross domestic product (GDP) by the fifth year of the forecast and that public sector borrowing must be below 3% of GDP over the same time period. Indeed, in relation to the second rule, Mr Hunt pointed out that borrowing looks set to fall below 3% of GDP by 2025/26 and that by the end of the forecast period it represents the lowest level of annual borrowing since 2001.

In terms of growth, Mr Hunt revealed that the updated OBR projections suggest the UK economy will expand by 0.8% this year, marginally higher than the fiscal watchdog’s autumn forecast. Next year’s growth rate was also revised upwards to 1.9% compared to the 1.4% figure previously predicted.

Cost-of-living measures

The Chancellor also announced a series of measures designed to help families deal with cost-of-living pressures. These included: an extension to the Household Support Fund at current levels for a further six months; maintaining the ‘temporary’ 5p cut on fuel duty and freezing it for another 12 months; an extension of the freeze in alcohol duty until February 2025; an extension in the repayment period for new budgeting advance loans from 12 months to 24 months, and abolition of the £90 charge for a debt relief order.

Personal taxation, savings and pensions

Following previous changes to National Insurance Contributions (NICs) from January 2024, the government announced further changes to take effect this April:

The main rate of employee NICs will be cut by 2p in the pound from 10% to 8%, which, when combined with the 2p cut that took effect in January, is estimated to save the average salaried worker around £900 a year
There will be a further 2p cut from the main rate of self-employed NICs on top of the 1p cut announced at the Autumn Statement
This means that from 6 April 2024, the main rate of Class 4 NICs for the self-employed will reduce from 9% to 6%. Combined with the abolition of the requirement to pay Class 2 NICs, this will save an average self-employed person around £650 a year.

To remove unfairness in the system, changes to Child Benefit were announced:

The Child Benefit system will be based on household rather than individual incomes by April 2026
From April 2024 the threshold for the High Income Child Benefit Charge will be raised to £60,000 from £50,000, taking 170,000 families out of paying this charge
The rate of the charge will also be halved, so that Child Benefit is not lost in full until an individual earns £80,000 per annum
The government estimates that nearly half a million families will gain an average of £1,260 in 2024/25 as a result.

The government announced two savings products to encourage UK savings – a new UK Individual Savings Account (ISA) and British Savings Bonds:

The new ISA will have a £5,000 annual allowance in addition to the existing ISA allowance and will be a new tax-free product for people to invest in UK-focused assets
British Savings Bonds will be delivered through National Savings & Investments (NS&I) in April 2024, offering a guaranteed interest rate, fixed for three years.

Expressing concern that, across the pensions industry, investment into UK equities is only around 6%, the Chancellor announced plans to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations, including UK equities, working closely with the Financial Conduct Authority (FCA) to achieve this.

The non-dom tax regime, available to some UK residents with permanent domicile overseas, is to be abolished. From April 2025, new arrivals to the UK will not have to pay tax on foreign income and gains for the first four years of their UK residency. After that, they will pay the same tax as other UK residents. Transition arrangements will be allowed for current non-doms.

In addition:

As previously announced in the Autumn Statement, the government is working to bring forward legislation by the end of the summer to allow people to invest in a diverse range of investment types through their ISAs
The existing ISA allowance remains at £20,000 and the JISA (Junior ISA) allowance and Child Trust Fund annual subscription limits remain at £9,000
The Dividend Allowance reduces to £500 from April 2024
The annual Capital Gains Tax (CGT) exemption reduces to £3,000 from April 2024
The standard nil rate Stamp Duty Land Tax threshold for England and Northern Ireland is £250,000 and £425,000 for first-time buyers, remaining in place until 31 March 2025
The Income Tax Personal Allowance and higher rate threshold remain at £12,570 and £50,270 respectively until April 2028 (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
There will be a consultation on moving to a residence-based regime for Inheritance Tax (IHT). No changes to IHT will take effect before 6 April 2025 – £325,000 nil-rate band, £175,000 main residence nil-rate band, with taper starting at £2m estate value
From 1 April 2024, personal representatives of estates will no longer need to take out commercial loans to pay IHT before applying to obtain a grant on credit from HMRC
The State Pension, as previously announced, will go up by 8.5% in April, which means £221.20 a week for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016) and £169.50 a week for the full, old basic State Pension (for those who reached State Pension age before April 2016)
· The removal of the Lifetime Allowance (LTA) from pensions tax legislation from April
As previously announced, the National Living Wage for over-23s – paid by employers – will rise from £10.42 an hour to £11.44 an hour in April.

Business measures

Various business measures announced included the raising of the threshold at which small businesses must register to pay VAT from £85,000 to £90,000 from April 2024. In addition, the Recovery Loan Scheme for small businesses will be extended until March 2026.

Property taxation

The Chancellor also announced the government’s plans to make the property tax system fairer, by:

Abolishing the Furnished Holiday Lettings tax regime
Abolishing Stamp Duty Land Tax Multiple Dwellings Relief from 1 June 2024
Reducing the higher rate of CGT on residential properties from 28% to 24%.

Public services

“Good public services need a strong economy to pay for them, but a strong economy also needs good public services.” This is how the Chancellor introduced the government’s “landmark” Public Sector Productivity Plan which, it says, will restart public sector reform and change the Treasury’s traditional approach to public spending.

Our National Health Service is, said Mr Hunt, “rightly the biggest reason most of us are proud to be British.” He announced £3.4bn to modernise NHS IT systems, which is forecast to unlock £35bn of savings by 2030 and boost NHS productivity by almost 2% per year between 2025/26 and 2029/30.

This includes:

Modernising NHS IT systems
Improvements to the NHS app to allow patients to confirm and modify appointments
Piloting the use of AI to automate back-office functions
Moving all NHS Trusts to electronic patient records
Over 100 upgraded AI-fitted MRI scanners to speed up results for potentially 130,000 patients per year.

The Chancellor announced a £2.5bn funding boost for the NHS in 2024/25, allowing the service to continue its focus on reducing waiting times for patients.

Mr Hunt also announced £800m of additional investment to boost productivity across other public services, including:

£230m for drones and new technology to free up police officers’ time for frontline work
£75m to roll out the Violence Reduction Unit model across England and Wales
£170m for the justice system, including £55m for family courts, £100m for prisons and £15m to reduce administrative burdens in the courts
£165m to fund additional children’s social care placements
An initial commitment of £105m to build new special free schools.

Other key points

New duty on vaping products to be introduced from October 2026
Tobacco duty will be increased from October 2026
Air Passenger Duty adjustments to non-economy class rates from 2025/26
Energy Profits Levy one year extension from 1 April 2028 to 2029
Boosting local growth through a continuation of the Investment Zones programme
£1bn in additional tax relief over the next five years for creative industries
Housing investment including £124m at Barking Riverside and £118m to accelerate delivery of the Canary Wharf scheme (including up to 750 homes)
£120m for the Green Industries Growth Accelerator (GIGA)
£7.4m upskilling fund pilot to help SMEs develop AI skills of the future
Extension to Freeport tax reliefs to September 2031
Extension to and deepening of devolution in England, including the North East Trailblazer Devolution Deal
HMRC to establish an advisory panel to support the administration of the R&D tax reliefs.

Closing comments

Jeremy Hunt signed off his Budget saying he was delivering, “A plan to grow the economy, a plan for better public services, a plan to make work pay… Growth up, jobs up and taxes down. I commend this Statement 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 the Budget taxation and HMRC rules 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 to be correct at the time of writing (6 March 2024)

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Investing for the long term – lessons from the past

Posted on 27 September 202228 March 2025 by Sophie Soraf

The emergence of COVID-19 brought a rapid end to the drawn-out recovery of major stock markets from the share price lows associated with the financial crisis a decade ago. When the scale of the threat to lives and livelihoods became apparent, market analysts and investors reassessed the global economic outlook and corporate prospects; they didn’t like what they saw and a wave of selling followed, with inevitable consequences. Most share prices, and thus stock indices, were impacted, with market volatility continuing throughout 2020.

Market analysts and investors aren’t infallible, but when something like COVID-19 strikes they get nervous because closed borders, flight bans and lockdowns can pose a threat even to large companies, especially in exposed sectors. Axed dividends and distressed rights issues are anathema to the jittery; and the largest blue-chip companies aren’t immune. Little wonder then that the 100 shares comprising the UK’s blue-chip share index, the FTSE 100, rapidly lost about one-third of their combined value in late Februaryv and March 2020.

Lessons from history

Created in 1984 with a starting level of 1,000 points to provide a wider index of leading shares quoted in London, the FTSE 100 largely superseded the narrower Financial Times 30-share index launched in 1935. As a barometer of economic outlook and corporate prospects, the FTSE 100 has gauged a few storms over the past 36 years. A chart of its progress reveals a plethora of spikes and dips, the starkest of which can be associated with key events in recent financial history.

graph2

Chart: FTSE 100 since inception to 1 September 2021, source Yahoo and Trading Economics

Not the first FTSE 100 dip

After its launch on 3 January 1984, the FT’s new share index only slipped very briefly below 1,000 points that year. It then made progress, sometimes faltering, to hit 2,000 points by March 1987, by then buoyed by the effect of the previous October’s ‘Big Bang’ modernisation of the London Stock Exchange’s trading structure. Six months of further upticks followed and the index broke through 2,350 in early October 1987. It would be two years before that level was attained again.

On 19 October 1987, the Monday after The Great Storm ravaged Southern England, global stock markets suffered a crash so severe that the day became known as Black Monday. A tsunami of selling, much of it blamed on new-fangled computer-program trading, rapidly took the FTSE 100 down to around 1,600, starting with an 11% drop on the Monday and 12% the next day.

A 1,000-point drop

High interest rates and other threats to UK economic growth and even talk of an impending recession brought a 1,000-point drop in the FTSE 100 in the autumn of 1998, almost all of it recovered by the year-end. General bullishness continued through 1999, which ended with the index nudging 7,000. As the year 2000 unfolded, a combination of overvaluation, epitomised by the rapidly inflating ‘dotcom bubble’, and a global economic slowdown brought further investor jitters.

The bull market had marched the FTSE 100 up the hill; the ensuing three-year bear market marched it back down again to around 3,600 in the spring of 2003. The index would take another five years to climb back above 6,500, where it was delicately poised for the next big shock: the 2008 collapse of US investment bank Lehman Brothers and the cascade of failures prompting what became known simply as ‘the global financial crisis’. By March 2009, the index was down around 3,500 again.

Long term trend

It was a long haul back from there for the FTSE 100 but, after gyrations associated with various stages of the Brexit process, the start of 2020 saw it comfortably above 7,000. News of a new virus outbreak in an unfamiliar Chinese city seemed at first like a distant threat. As the outbreak turned into a pandemic, global markets faltered again and the FTSE 100 headed below 5,000 before recovering some of the loss. COVID-19 has brought a reset of the blue- chip barometer, the FTSE 100 index.

Despite a variety of market shocks and rebounds, the index still has a long term growth trend. It is important to remember that some market volatility is inevitable; markets will always move up and down. As an investor, putting any short-term market volatility into historical context is useful.

Financial advice and regular reviews are essential to help position your portfolio in line with your objectives and attitude to risk, and to develop a well-defined investment plan, tailored to your objectives and risk profile.

The ascent of the 1990s

Share-price recovery was slow, hampered by a short UK recession in 1991-92 caused in part by high interest rates and an over-valued pound associated with efforts to keep sterling within Europe’s exchange rate mechanism. After Chancellor Norman Lamont took sterling out of the ERM in September 1992, having spent billions and upped base rate to 15% trying to stay in, the index gained about 14% in six months.

As 1994 dawned, a decade on from its launch, the FTSE 100 stood at around 3,400; although then, as now, changes had been made to its constituent shares as companies’ respective market capitalisations waxed and waned. Concerns about the economy and tax plans dampened sentiment and the index fell below 3,000 during the first half of 1994 before starting a five-year ascent to break the 6,000 barrier in the summer of 1998. After a 500% rise in 14 years, what came next for the FTSE 100?

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.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Past performance is not a reliable indicator of future returns and all investments involve risks. Some information quoted was obtained from external sources we consider to be reliable.

Tees is a trading name of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered number 211314. Tees Financial Limited is registered in England and Wales. Registered number 4342506.

Interest rates set to fall more gradually

UK economy losing momentum

Markets (Data compiled by TOMD)

Index

Value

Movement since 31/10/24

Unemployment rate rises

Retail sales fall by more than expected

Economic review October 2024

UK inflation falls sharply

Markets (Data compiled by TOMD)

Index

Value (31/10/24)

Movement since 30/09/24

Retail sales rise for third successive month

More signs of a cooling jobs market

UK growth rate at a two-year high

Inflation data dampens early rate cut hopes

Markets (Data compiled by TOMD)

Index

Value (31/05/2024)

Movement Since 30/04/2024

Consumer sentiment continues to rise

Wage growth remains resilient

OBR forecasts

Cost-of-living measures

Business measures

Property taxation

Other key points

Closing comments

Lessons from history

Not the first FTSE 100 dip

A 1,000-point drop

Long term trend

The ascent of the 1990s