UK's Q4 2015 economic growth confirmed at 0.5%

Fourth quarter economic growth in the UK was confirmed in February as being 0.5%, helped by steady growth in the services sector, which grew by 0.7% during the period. However, the important production sector (which includes heavy industry and manufacturing) saw a contraction of 0.5%. This contraction together with a decline in overall net trade, countered these results, dragging the final results down.

Overall, therefore, according to the Office for National Statistics (ONS), the UK economy grew by 2.2% through the whole of 2015. Whilst this reflected the smallest growth rate seen since 2012, it should be emphasised that the UK is still one of the most robust and fastest growing economies of the developed nations.

This dichotomy in sector growth was emphasised by the Chancellor of the Exchequer, George Osborne, who in January this year was reported to have said the UK economy was still likely to see a “dangerous cocktail” of economic risks in 2016. These significant challenges include tension in the Middle East, low commodity prices and slowing growth in China, weighing on global confidence.

The fourth quarter of 2015 represented the 12th consecutive quarter of growth here in the UK. Prior to this between 2009 and 2012 the UK showed erratic quarterly growth. This prompted Joe Grice, the Chief Economist of the ONS, to state: “Once again, the buoyancy of the services sector has offset the relative sluggishness of the rest of the UK economy.”

Meanwhile, the International Monetary Fund (IMF), based in Washington, USA and headed by Christine Lagarde, warned that although the UK’s economy has been “strong”, the forthcoming referendum on the UK’s continued membership of the European Union, now scheduled for June 23rd, brought “risk and uncertainty” to the global economy as a whole, which was already “highly vulnerable to adverse shocks.”


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Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
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MARKETS: (DATA COMPILED BY THE OUTSOURCED MARKETING DEPARTMENT)

Equity markets had a torrid February, with most global commodity prices continuing to fall, a failure to address the glut in oil production and the UK’s decision to officially call the referendum on its membership of the European Union, all conspiring to unsettle the markets.

 Here in the UK, the FTSE100 had at one point (Feb 11th) fallen by 9% to 5,537.0, only to recover and actually finish February higher at 6,097.10, to show a meagre rise of 0.22%. The wider FTSE250 followed suit, registering a modest rise of 0.7% to end February at 16,603.1. However, the junior AIM market failed to recover its earlier losses closing at 692.90, for an equally modest decline of 0.12%.

Across the pond the Dow Jones index closely followed the global trend, suffering intra-month losses, but regaining late ground to finish at 16,516.5, a small rise of 0.3%. The NASDAQ, heavily influenced by technology stocks, fared worse, losing 56 points to 4,557.95, so ending 1.21% lower.

Mainland Europe suffered, as economic woes continued with the Eurozone flirting with renewed recession, as inflation there turned negative. The Eurostoxx50 lost just short of 100 points to 2,945.75 a fall of 3.26%.

In Japan, the Nikkei255 index saw the worst falls, losing 8.51% to 16,026.76, as the continuing ‘Abenomics’ of fiscal stimulus, failed to rejuvenate the stagnant domestic economy.

As a direct result of the impending UK referendum of leaving the EU, Sterling was sold off, falling 2.8% against the US Dollar to $1.39 and saw a larger fall of 3.79% against the Euro to end the month at €1.27. At the same time, the Euro managed to hold its ground against the Greenback remaining at $1.08.

Gold had a good month, as its safe-haven status attracted buyers, with the metal rising by 10.45% over the month, to close at $1,234.9 a troy ounce.

Meanwhile, ‘Black Gold’ – oil – again saw volatile markets, with uncertainty around global production levels remaining. The Brent Crude benchmark price did manage to rise though by 2.03% to $36.64 a barrel.

Issued by: Enable Independent Financial Life Planners • 
25c North Street, Bishops Stortford, Herts CM23 2LD • Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

UK growth forecase cut by the Bank of England

According to the Bank of England’s (BoE) latest forecast, as reported in their ‘Inflation Report’ (IR) released in early February, economic growth in the UK for 2016 will be reduced to 2.2%, a fall from their November forecast of 2.5% growth.

 At the same time, the IR downgraded its growth forecast for 2017 to 2.3% from its previous forecast, made in November 2015, of 2.6%.

UK average weekly wage growth forecasts were also downgraded, as the BoE now expects such growth to be 3% in 2016, down from its previous forecast of 3.75%. The report stated that it had: “eased significantly more” than anticipated. The Bank now believes that it will not be until 2018 that average weekly earnings will increase to the levels seen prior to the financial crisis.

At a recent conference the Governor of the BoE, Mark Carney, stated that there were some positive signs for the UK economy, including, “Sterling has fallen 3.5% since November. It’s the largest decline between inflation reports since the crisis.” Any fall in the exchange rate of sterling against our trading partners’ currencies makes UK exports cheaper and should, therefore, boost our competitiveness in the global market place.

The BoE also released the minutes of its latest Monetary Policy Committee (MPC), which sets interest rates. This disclosed that they voted unanimously 9-0 to hold interest rates at their historically low rate of 0.5%. It was interesting to note here that one member of the MPC, Ian McCafferty, who had previously been considered a Hawk by voting to raise interest rates in their August meeting, this time voted for no change.

Issued by: Enable Independent Financial Life Planners • 
25c North Street, Bishops Stortford, Herts CM23 2LD • Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

The important services sector continues to flourish

In January, the closely followed Purchasing Managers Index (PMI) for the UK’s services sector, compiled by the Markit/CIPS index (CIPS), was set at 55.6, a fraction higher than the 55.5 recorded in December. Any figure above 50 indicates that output in the sector is expanding. The services sector is by far the biggest element of the UK’s economy, accounting for over 75% of the nation’s Gross Domestic Product (GDP).

Further reinforcing the good news surrounding the UK economy, earlier in the month CIPS reported the construction sector at 55.0 and the manufacturing sector at 52.9.

Commenting on these results Chris Williamson, the Chief Economist of CIPS said: “The three PMI surveys for January collectively point to a slight upturn in the rate of economic growth, consistent with GDP rising at a quarterly rate of 0.6% in the first quarter, up from 0.5% in the fourth quarter (of 2015), if current levels are sustained.”

However, he went on to caution that: “cracks are beginning to appear in the country’s resilience to the various headwinds.

“Worries about a Chinese ‘hard landing’, financial market jitters, higher interest rates in the US, more austerity at home and the possibility of ‘Brexit’ and EU tensions have collectively pushed the business mood in the dominant service sector to its darkest for three years.”

On a more positive note, in early January, the National Institute of Economic and Social Research (NIESR) predicted that the UK economy would grow by 2.3% in 2016. This forecast is unchanged from their previous estimate published in November.

Issued by: Enable Independent Financial Life Planners • 
25c North Street, Bishops Stortford, Herts CM23 2LD • Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

More Pension changes ahead?

It is highly likely that the Chancellor is finalising plans that could see the most attractive aspect of pension saving i.e. the boost given to contributions in the form of tax relief curtailed or even scrapped. The Treasury insist that a decision has not yet been made, but those close to Number 11 say a reduction in tax relief for higher earners is “almost certain” and that that cut is likely to be announced in the Budget on 16th March.

Last year an extreme model was being mooted suggesting Mr Osborne might scrap pension tax relief altogether, by doing so he could net the Exchequer a huge £35bn annual saving and align the pensions system with Isas through the creation of so‑called “pension-Isas”.  But current sources suggest that this not the Government’s preferred “solution” to cap the cost of pension tax relief. But the most likely outcome could be a further cut back to the relief available to higher earners.

If you are one of those 4.5 million people who pay 40pc tax on the top part of your income, you are likely to lose tax relief at the 40pc rate, the relief is likely to be limited to 20pc, or the basic rate of tax. For every £100 a basic-rate taxpayer contributes to a pension, the Government adds a further £25. For every £100 a higher-rate taxpayer contributes, the state adds this £25, and the taxpayer can then claim a further £25 relief via his or her tax return. In total the benefit for a higher-rate taxpayer is thus £50 for a net £75 contribution – or a 67pc uplift. And this is probably what the Exchequer will target.

Source: The Telegraph


Issued by: Enable Independent Financial Life Planners • 
25c North Street, Bishops Stortford, Herts CM23 2LD • Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
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Do you want to be a 'company landlord'?

Enable’s IFA’s in Bishops Stortford know that a diverse portfolio is the best method for wealth management and with some already invested in property letting becoming a company landlord is an option. According to Mortgages For Business there has been a substantial increase in the number of buy to let mortgage applications made by limited companies.  They suggest this indicates that more landlords are incorporating as a way of getting round some of the recent curbs on landlords’ mortgage interest tax relief.

According to Mortgages For Business, limited company applications accounted for 43 per cent of its new BTL activity in January - up from 38 per cent in December.  “Landlords have woken up to the fact that transacting via a corporate vehicle is a feasible option and in many cases, the most prudent route going forward. I wouldn’t be surprised if the percentage continues to rise as landlords, especially the higher tax rate-paying ones, prepare for the forthcoming changes to relief on finance costs” according to David Whittaker, managing director of Mortgages for Business.

The overall number of BTL applications dealt with by the company in January, from individuals and limited companies combined, was 27 per cent more than a month earlier - an indication that landlords are trying to beat the April 1 deadline when the government’s three per cent stamp duty surcharge comes in to effect on buy to let property purchases. “The increase is due to landlords trying to get as many purchases as they can complete before the surcharge, after which I would expect transactions to return to more considered levels” said Whittaker.

Source: Landlord Today


Issued by: Enable Independent Financial Life Planners • 
25c North Street, Bishops Stortford, Herts CM23 2LD • Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

Looking to buy a house?

Enable’s IFA’s in Bishop’s Stortford like many others have seen that according to the Nationwide housing market appreciation continued at 4.4 per cent in the year to late January. Meaning the average price of a home in the UK stands at £196,829. Nationwide chief economist Robert Gardner says “the labour market appears to have significant forward momentum. Employment has continued to rise at a robust rate in recent months and, while the pace of earnings growth has slowed somewhat, in inflation-adjusted terms regular wages continue to rise at a healthy pace.”  “But the market is already characterised by a shortage of stock, with the Royal Institute of Chartered Surveyors reporting that the number of properties on estate agents’ books remains close to all-time lows”.

Alongside this the average deposit for a property has risen 15 per cent in the past year and currently stands at over £80,000 according to one mortgage broker. And the data, from the Mortgage Advice Bureau, says a typical buyer’s loan-to-value fell to 68.2 per cent in December, representing an annual decrease of 1.1 per cent. The broker firm says this is the lowest LTV seen since June 2010, and suggests borrowers are shouldering more of the cost of their house purchase themselves.

The continuing volatility of the market can be seen by other data from Mortgage Advice Bureau, which shows that affordability - based on the typical buyer’s income expressed as a percentage of property price- has been worsening for three months. If you are struggling to make sense of it all Enable's experienced IFAs are happy to talk you through mortgage options.

Your home could be at risk if you do not keep up your repayments

Source: Estate Agent today

Issued by: Enable Independent Financial Life Planners • 
25c North Street, Bishops Stortford, Herts CM23 2LD • Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE