Chapters Financial News

The middle of 2024 has been momentous, both in terms of politics and sport, in the UK and in Europe. With the elections in the UK and France complete for now, many will begin to focus on the race to the White House in America.

As you might anticipate, and as the dust begins to settle from the election results, there is much speculation as to how Labour may go about funding their manifesto plans. They certainly seem to have come out of the blocks with gusto in their first couple of months. Most manifestos indicated and clarified that taxes will need to rise, but these might not be the headline tax rates of income tax or National Insurance. The first Budget will be interesting, and the date has been set for 30 October 2024. The preamble to this has been the announcement of a £22bn shortfall in public finances and it will be noteworthy how this will be addressed, with the Prime Minister noting that it might be painful.

Amongst other immediate announcements from Westminster, our new Chancellor, Rachel Reeves MP, has noted that she plans to review pensions; however, there is little detail at this time, and the immediate theme seems to be heading towards directing some pension investment funds to invest in UK asset building (something the previous incumbents started as a process). A few larger investment houses have in principle signed up to the concept of this investment prospect within the UK, although as always, I am sure the final details will be crucial in how this works.

For households across the UK, there is much financial mixed messaging to consider in the near future. There are a few shards of economic sunshine that might brighten the autumn evenings. Inflation has now settled around the Bank of England target of 2.0%, with a slight revision upwards in July to 2.2% (CPI) from June, in line with their expectations. With this achieved, the Bank of England has the opportunity (along with a few other global central banks) to ease the base rate down from its recent peak of 5.25%. These are not going to be large rate drops, perhaps 0.25% per reduction, as we saw on 01 August. The markets are currently factoring in one further rate reduction before the end of 2024, which will help variable rate borrowers, however at the same time reduce deposit rates for savers. In addition, the UK has seen two strong quarters of growth (Gross Domestic Product / GDP) in the UK so far with 0.7% in the first quarter and 0.6% in the second quarter, a significant reversal of the recessionary statistics seen at the end of 2023.

It should also be noted that energy costs have fallen twice in 2024 (in April and July), which has been a welcome relief for many. However, under the energy price cap set by the energy regulator Ofgem, prices are expected to rise by around 10% from October. Prices are lower than in the winter of 2023, although the withdrawal of winter fuel payments for around 10 million pensioners this winter will have an impact in the coming months.

The annual growth for regular earnings was 5.4% in April to June 2024, and when adjusted for inflation at that time, 2.4% in real terms (source: Office for National Statistics) which is likely to help many households when it comes to their real spending power. These changes, along with other economic factors, might mean the balance between financial 'feel good' and financial pressure is slim as we head towards the end of the year and the festive season.

Annuity rates have levelled at their elevated position, and we have seen many investment markets see firm returns over the year to date, although this is not a guarantee of future returns.

Another highlight of the months ahead is that Chapters Financial will be celebrating its 20th anniversary, and although not an economic factor, will bring some cheer to the team at the beginning of October 2024.

Now that we are firmly into the second half of 2024 and we approach the second half of this current tax year (2024/2025), don't forget to use your tax allowances

where affordable and available.

We look forward to the balance of the year.

No individual advice is provided during the course of this blog.

Keith G Churchouse FPFS
Director
Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899