Building Business Resilience – Episode Two

Building Business Resilience – Episode Two

Studies show that regular exercise can improve your mental health, your memory, your energy levels, and make you feel happier overall.

In episode 2 Building Business Resilience episode we bring you some essential fitness tips to consider during lockdown with top UK Strength & Conditioning Coach Trystan Bevan

Investment market update: March 2020

It probably comes as no surprise that much of the market update for March will be linked to the coronavirus pandemic. What started as a virus in Wuhan, China, has quickly become a global issue that’s affecting millions of people worldwide and implications for stock markets.

As governments around the world impose measures to try and halt the spread of the virus, economies have ground to a halt. Previously the International Monetary Fund (IMF) predicted the global economy would rise by 3.3% this year. However, it’s since warned that the forecast has been torn up as Covid-19 impacts both supply and demand. It’s now expected global growth will dip below last year’s (2.9%), but it difficult to predict by how much given the current uncertainty.

Few industries have been left untouched by the pandemic, leading to fears that a global recession is just around the corner. With travel nationally and internationally facing restrictions, the airline and travel industry have been one of the most severely affected. IATA, which represents the airline industry, said the pandemic is set to cost the industry at least $63 billion. In recent weeks, airlines have been forced to ground flights and, in some cases, entire fleets.

UK

Usually, the Budget taking place would be headline news. But the 2020 Budget, taking place on 12th March, has been overshadowed by the impact of the coronavirus and lockdown. However, the Budget was used to announce some of the early measures taken to stimulate the economy during uncertainty, including offering ‘business interruption’ loans and cash grants to small firms.

Just before the Budget, the Bank of England also announced a cut to its base interest rate, quickly followed by another cut just a week later. The base rate is now just 0.1%, a historic low.

The current circumstances have been likened to a ‘wartime situation’ with a stimulus package worth £20 billion to support businesses through the worst of the crisis. However, the FTSE continued to experience volatility. In fact, the FTSE 100 ended quarter one 24.8% down, the worst quarter since 1987.

However, even before the coronavirus was taking hold, figures suggest that the UK economy was flatlining. The Office for National Statistics (ONS) figures show that GDP was flat in January and weaker than expected. On top of this in the three months to January, the service sector was flat, and production contracted by 1%. Whilst construction grew by 1.4%, this only represents a small part of the economy.

The Purchasing Managers’ Index (PMI) demonstrates the impact the pandemic is already having, with figures below 50 showing contraction:

  • Overall, the PMI shows an extremely sharp fall in activity, falling from 53 to 37.1. It marks the worst reading since the survey began in 1990
  • The service sectors slumped to 35.7 from 53.2 in February
  • Manufacturing registered a small fall from 51.7 to 48, however, the PMI calculation assumes long delays for supplies are a sign of a strong economy, so the situation is likely to be worse than the figures indicate

So, where does this leave the UK? Predictions suggest that a recession is becoming more likely. Capital Economics predicted UK GDP could fall by 15% in the next quarter. This compares to the 6% decrease seen during the 2008 financial crisis.

A YouGov poll suggests that Brits aren’t optimistic about economic prospects either. More than half (52%) expect a recession within the next year. Some 19% expect a depression, typically associated with slumped output, extremely high unemployment and widespread company closures.

Europe

Europe is in a similar position to the UK; governments are taking measures to support individuals and businesses throughout the pandemic, stock markets are experiencing volatility and there are fears that the crisis will trigger a recession.

In response to the economic shocks, the European Union suspended debt borrowing limits. Christine Lagarde, President of the European Central Bank (ECB), also pledged there were ‘no limits’ on the actions the ECB would take with quantitative easing used in a bid to sustain the eurozone economy.

The PMI for the eurozone reached a record low of 31.4, with services and manufacturing falling to 28.4 and 39.5 respectively.

US

In response to Covid-19, the Business Roundtable, which speaks for dozens of America’s biggest companies, including JP Morgan Chase, Apple and General Motors, called for bold action to limit the economic fallout.

The White House has proposed a roughly $850 billion emergency economy rescue package to support businesses and taxpayers. The Federal Reserve also made an emergency rate cut, with a target range of 0% to 0.25%. The combination did help to ease markets, but investors still experienced significant volatility.

The latest figures for job growth in the US painted a positive picture for January and February. But this was before the impact of coronavirus was felt, with unemployment figures rising throughout March. In New York alone, there was a 1,000% increase in unemployment claims. Capital Economics predicts the country is heading for a 10% unemployment rate, more than double the rate seen at the end of 2019.

Risk of a recession is also being felt in the US. Bloomberg’s News’ Recession Tracker calculates the probability of a recession is over 50%.

This all had an impact on the markets. Wall Street suffered its worst day since 1987 on the 16th March. US 10-year treasury bonds, the benchmark for global demand of bond, plumbed to new depths, far beyond those of the financial crisis, indicating global investors are looking for ‘safety’.

Asia

As the original epicentre for the outbreak, it’s not surprising that China has reported a huge tumble in factory sales for the first two months of the year. The country saw factory sales fall by 38.3% year-on-year. Highlighting the impact of the pandemic on both supply and demand, new car sales in China also fell by 80% in February year-on-year.

Whilst the current stock market volatility and economic uncertainty may be a cause of concern among investors, it’s important to keep a long-term view and your goals in mind. If you’d like to discuss your portfolio, please get in touch.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

What does the coronavirus mean for my mortgage?

Millions of Brits have faced losing their jobs or a reduction in pay as the coronavirus pandemic has forced businesses to take action. Some firms have been forced to close due to the nationwide lockdown, whilst others will have reduced working hours or laid off staff to minimise losses during uncertain times. For some, it may mean struggling to keep up with usual outgoings, such as mortgage repayments, but steps have been taken to offer support.

For many homeowners still paying their mortgage, it will be the single biggest expense faced each month. As a result, you may be worried about how you’ll pay your mortgage in the coming weeks and months. The good news is that if you’re struggling, there is help available.

Mortgage holidays

Chancellor Rishi Sunak announced a policy that aims to support homeowners, struggling to meet their mortgage repayments.

If you choose to, you can take a three-month mortgage holiday, putting repayments on hold in the short term. If your income has fallen as a result of the pandemic, a mortgage holiday can give you some time to get back on your feet. It’s a step that can relieve some of the pressure and anxiety you may be experiencing due to the current uncertainty around health and the economy.

It’s also worth noting that in addition to the ability to take a mortgage holiday, the Bank of England has cut its base interest rate. Two cuts in the space of a week in March means the base rate has fallen from 0.75% to 0.1%. If you’re paying a tracker or variable mortgage, this means the level of interest you pay will fall. If you haven’t already been contacted by your lender about this fall, you can get in touch with them directly. Whilst this doesn’t stop mortgage repayments, paying less interest can mean you have more income to focus on other areas.

If you have a fixed-rate mortgage, you will not benefit from the interest rate fall.

Is a mortgage holiday right for you?

A mortgage holiday can provide you with a few months of relief if your finances have been affected by the pandemic. But there are drawbacks to consider before you make a decision.

First, whilst repayments will be halted for several months and you don’t need to worry about arrangement fees or charges, interest will still accrue. You will still need to pay back the amount you owe now, as well as any unpaid interest. This means it may take longer to pay off your mortgage and cost more. Your lender should explain the impact of taking a mortgage holiday to you and confirm your monthly repayments and the term of your mortgage, you may then decide to:

  • Spread the deferred payments over the outstanding term of your mortgage so that your mortgage length isn’t extended. How much this affects your future outgoings will depend on your regular mortgage payments and the amount of time left on your mortgage.
  • Continue making the same mortgage repayments but extend the term of your mortgage. You may still see a small increase in your monthly repayments.
  • Make interest-only payments during the mortgage holiday. This will reduce the increase in your monthly repayments as interest won’t be accruing, however, you will still need to pay back the shortfall in your monthly payments using one of the two above options.

As a result, a mortgage holiday should only be considered if you’re unable to meet financial commitments in the short term.

What help is there if you’re a landlord?

Landlords may also be able to apply for a mortgage holiday if their rented property isn’t owned outright if their tenant has been affected by coronavirus and can’t meet rent as a result. However, if you take advantage of a mortgage holiday on a Buy to Let property, you will be expected to pass this relief on to your tenant.

As with the traditional mortgage holidays, taking a repayment holiday on a Buy to Let mortgage may mean you pay more over a longer period.

Does support extend to other forms of borrowing?

Whilst the Chancellor hasn’t announced any measure on other forms of borrowing, such as credit cards or loans, many lenders are providing support. This may include repayment holidays. If you’re worried about keeping up with financial commitments as coronavirus continues to have an impact, contact lenders directly. They may be able to offer you some support, but this will be at their discretion. Reaching out before you miss a repayment can minimise the damage the current uncertainty has on your financial security now and in the future.

If you’d like to discuss your financial plan in light of the current circumstances, please get in touch. Our financial plans consider a range of scenarios, including your personal goals and periods of economic downturn, to provide you with confidence.

5 ways the government is helping the self-employed during the pandemic

The current coronavirus pandemic has had a significant impact on the UK and global economy. If you’re self-employed, you may find that contracts have been paused or that new work has dried up, affecting your finances in the short and long term. However, steps have been taken to provide support to the self-employed that you may be able to take advantage of.

In recent years, self-employment has steadily increased thanks to more opportunities and improved technology. In 2017, official figures suggest over 15% of the UK’s labour force was self-employed, accounting for 4.8 million people. As the pandemic has meant many businesses have been forced to shut or limit operations, as well as individuals tightening their belts, Covid-19 has had an impact on the income of millions of self-employed individuals.

Following calls to provide support, the government unveiled a package of measures designed to support those who own their own business at the end of March. Understanding these measures can help you access financial support if you need it and provide confidence that you can get through the pandemic.

1. Self-employed tax deferral

If you’re due to make an Income Tax payment under the Self-Assessment system in July, this can be deferred. This measure applies to those that were due to make a ‘payment on account’ by 31st July 2020. These payments now won’t be due until 31st January 2021. This measure will be applied automatically and if you decide to defer payment you won’t face any penalties or interest for late payment.

It’s a step that can provide you with additional savings to use during the pandemic. However, keep in mind that the Income Tax payment will still need to be made early next year and plan for this. You don’t have to wait until January 2021 to make a payment, you can do so in line with the original deadline or later this year if you have the finances to do so.

2. Self-Employed Income Support Scheme

The Chancellor previously announced that employed workers that have been furloughed would receive 80% of their average monthly salary up to £2,500. The Self-Employed Income Support Scheme provides similar help for those running their own business.

This scheme will pay a taxable grant to self-employed people equivalent to 80% of their average monthly profits over the last three years up to £2,500. The scheme will be open for three months, with the possibility that it will be extended depending on how the pandemic situation develops.

The three months’ income will be paid as a lump sum in June at the earliest. Therefore, if your income has been immediately affected by the pandemic you will also need to look at other ways to meet financial commitments in the short term.

To qualify for the Self-Employed Income Support Scheme, you must:

  • Have trading profits of up to £50,000
  • Make the majority of your income from self-employment
  • Filed a tax return and already be self-employed

If you have been employed for less than three years, the Chancellor said that HM Revenue and Customs will look at ‘what you have’ on a case-by-case basis.

The Self-Employed Income Support Scheme doesn’t mean you’re excluded from measures previously announced. It has been confirmed that self-employed workers can also access the Coronavirus Business Interruption Loans. This measure can help you access loans, overdrafts, invoice finances and asset finances of up to £5 million for up to six years, with the government covering the first 12 months of interest payments and any lender-levied fees. Keep in mind though, the loan will have to be paid back and you will be liable for the interest after the initial 12-month period.

3. Universal Credit

Claiming Universal Credit if you have faced a significant reduction in earnings is an option, the usual eligibility criteria remain in place. How much you’d receive depends on your financial situation. The benefits calculator provided by national charity Turn2us can help you understand how much you’d receive through Universal Credit. Benefits usually start within five to six weeks, if you need financial support immediately, you may be able to claim an interest-free loan within the first month.

To provide support for those following guidance on self-isolation and social distancing, the requirement of the Minimum Income Floor have been temporarily relaxed. This previously limited payouts to those earning below the minimum wage through self-employment.

4. HMRC Time to Pay service

Those with outstanding tax liabilities that are now struggling to pay may be eligible to receive support through the HMRC’s Time to Pay service. If you have missed a tax payment or may miss the next payment due to the impact of coronavirus, this service may extend the deadline. These arrangements are made on a case-by-case basis and will depend on your circumstances and liabilities. If you’re concerned about missing tax payments, you should contact HMRC through its dedicated helpline 0800 0159 559.

5. Payment holidays on mortgages and loans

If you’re a borrower, repayment holidays are an option.

The government announced that mortgage payment holidays of up to three months are available to all homeowners who are up to date with their mortgage payments. This can provide you with some short-term financial security and relieve some of the pressure if your income has fallen. However, you will still owe the same amount as you do now and interest will continue to accrue on this. This means if you take a mortgage holiday paying it off will take longer and cost more.

This measure has also been extended to Buy to Let landlords whose tenants have been financially impacted by the coronavirus. Landlords that take advantage of this are expected to pass this relief on to their tenants.

If you’d like to discuss a mortgage repayment holiday, you should contact your lender to understand their process.

In addition to mortgages, many lenders are offering holidays on payments for other forms of borrowing, such as credit cards and loans. This is at the discretion of your lender. If you’re worried about making repayments and want to know what your options are, you should contact your provider directly.

If you’re struggling financially, don’t bury your head in the sand. The above five measures can help you meet financial commitments during these uncertain times. Being proactive is key, don’t wait until you’re struggling or missing payments before addressing the issue.