Investment market update: March 2021

Investment market update: March 2021

During March there were reasons to be optimistic. In fact, the Organisation for Economic Co-operation and Development (OECD) raised global growth forecasts following Covid-19 vaccination and stimulus package news around the world. It’s now expected the global economy will expand 5.6% this year.

Despite the pandemic dominating headlines, a survey from the Bank of America suggests Covid-19 is no longer the biggest risk worrying investors. Instead, their focus is on inflation. With low-interest rates set to continue, in order to support countries’ economies, interest rates could play a significant role in wealth management over the coming years.


The big news in the UK this month was the Budget. Chancellor Rishi Sunak unveiled a range of measures to support economic recovery following Covid-19 and to pay back the money borrowed over the last year.

For individuals, the Budget means freezes on many taxes and allowances, such as the Capital Gains Tax annual exemption and pension Lifetime Allowance. While the freezes mean taxes won’t rise immediately, they will have an impact in real terms over the next five years. From a business perspective, Corporation Tax will rise from the current 19% to 25% in 2023 for the largest companies.

The Budget also included support for aspiring homeowners, with the government revealing plans to back 95% mortgages. This led to a boost for homebuilders, with Persimmon and Taylor Wimpey seeing stock prices rise by 6% and 5.7%, respectively, when the news was leaked to the press.

While introducing the Budget, the chancellor was optimistic about growth forecasts and returning to “normal” over the coming months. This sentiment was echoed by Bank of England governor Andrew Bailey, who said there was a “growing sense” of economic optimism.

Consumers are becoming more confident about the future too. According to an Ipsos MORI survey, 43% of Britons think the economy will improve over the next 12 months, an increase of 14% from February.

Data that tracks economic growth suggests there are good reasons for this optimism.

According to IHS Markit, factory output is slowing but the manufacturing Purchasing Managers’ Index (PMI), which tracks new orders, input costs, and employment, has increased. This could signal a growth in demand. The services sector is also nearing growth. In a measure where readings above 50 indicate growth, it scored 49.5 in February. While still in contraction territory, it’s a sharp rise from the 39.5 recorded just a month earlier.

As retail and hospitality businesses prepare to reopen, news from the high street highlights the challenging circumstances firms are operating in:

  • High street favourite John Lewis revealed losses of £517 million in 2020, its first-ever full-year loss. Alongside the announcement, the department store said it would be permanently closing an additional eight stores, placing 1,500 jobs at risk.
  • Chocolatier Thorntons announced plans to permanently close all of its stores nationwide. The firm will continue to operate an online store.
  • Bakery Greggs posted its first annual loss since floating on the London stock market in 1984. Like-for-like sales were down 36% in 2020, resulting in a pre-tax loss of £13.7 million. This compares to a pre-tax profit of £108 million in 2019.

As well as Covid-19, Brexit continues to present challenges for businesses on both sides of the English Channel. Exports to the EU from the UK fell by 40% (worth £5.6 billion) in January. This represents the biggest monthly decline in British trade for more than 20 years. Imports from the EU also fell 28.2%, representing £6.6 billion worth of trade.


According to the service sector PMI, the eurozone could be on track for a double-dip recession. Activity and new orders fell in February, with a reading of 45.7 indicating a contracting sector. However, factory growth, with a PMI reading of 57.9, could help balance this out.

Lockdowns and social distancing restrictions haven’t harmed all businesses; Danish toymaker Lego, for example, has benefited from more families playing together, with consumer sales increasing by 21% in 2020.


There was good news for some businesses affected by the trade war between the US and Europe, including Scottish whiskey firms. The US and UK agreed to a temporary four-month suspension of the tariffs resulting from an ongoing dispute between the US and Europe over government aid to support Boeing and Airbus. It’s hoped the agreement signals that a quick post-Brexit trade deal can be reached.


China’s banking regulator issued a stark warning for investors, saying a bubble was building abroad. Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, said: “I’m worried the bubble problem in foreign financial markets will one day pop.”

He added that gains in the US and European markets, enabled by loose monetary policy, have “seriously diverged” from reality. He went on to say there was a bubble in China’s property market too, adding it was “very dangerous” for people to buy homes for investment or speculative purposes.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.


Investment market update: January 2021

Investment market update: January 2021

As we start 2021, there are reasons to be optimistic and some of this is showing in market movements. However, there are still obstacles which could have an impact on investments in the coming months.

The International Monetary Fund has upgraded its global outlook for this year by 0.3%, taking expected growth for 2021 to 5.5%. While only a marginal uptick, it does suggest that there are reasons to be positive.


The UK has started rolling out its Covid-19 vaccination programme, with plans to vaccinate all adults by autumn 2021. However, headwinds are still affecting businesses as we start the year with a third national lockdown.

Chancellor Rishi Sunak unveiled additional Covid-19 support for businesses at the start of the month. Amounting to £4.6 billion, it includes one-off top-up grants for retail, hospitality and leisure businesses worth up to £9,000 per property.

Despite ongoing support, UK GDP fell 2.6% in November 2020, breaking a six-month run of growth and unemployment that reached a four-year high of 5% in the three months to November.

The annual Budget will be held in March and further support is expected to be announced then.

Retail has been one of the most affected sectors during the Covid-19 pandemic. However, the figures from January highlight how it’s a tale with two sides.

While some firms have posted strong Christmas sales, including Asos, Tesco and Lidl, others have struggled to balance the books. Retail sales between November and December increased by just 0.3% according to the Office for National Statistics. This is far below forecasts of 1.2% at a time that was pivotal for many retail businesses. Primark, which has no online store to buffer the impact of closing physical shops, faces a £1 billion sales hit due to the third lockdown.

Debenhams and the Arcadia Group were two high-profile retail collapses at the end of 2020. Online fashion store Boohoo is now set to snap up Debenhams for £55 million, while Asos is in talks to acquire some of the Arcadia brands, including Topshop.

Another sector struggling is travel. It’ll come as no surprise that passengers at Heathrow for 2020 were down 73%. As the vaccine programme continues, it’s hoped that holiday bookings will rise.

A Brexit deal was finally reached in 2020 with just days to go before the deadline. But business concerns are still present. The CBI Industrial Trends survey found concerns over supply distribution are at the highest level in over 45 years. Nearly half of the 291 firms questioned said they are worried that access to materials or components will affect output in the coming months.


There are some positive signs from Europe, despite the eurozone contraction in December being worse than thought. The final eurozone PMI composite output index was 49.1, placing it in negative territory.

Among the positive news is the manufacturing sector strengthening. Manufacturing in the Euro area reached its highest level since May 2018, with a reading of 55.2, placing it firmly in the growth range.

There was also a surprise jobless rate fall. Unemployment in November across the EU was 8.3%, compared to 8.4% in October. However, unemployment among young people (under 25) highlights how this demographic is being affected by the pandemic; some 18.4% of young people were unemployed.

While the German economy shrank by 5% in 2020, industrial production is now strong, with output increasing by 0.9% in November. It fuels hopes that the economy could avoid a double-dip recession. With Germany often seen as the stalwart of the EU, it’s a good signal for the wider area too.


In January, Joe Biden was inaugurated as the 46th president of the United States. However, he’s set to face some significant challenges in the coming months.

Figures show that 140,000 jobs were lost in December, ending seven months of job growth. Unemployment is now at 6.7% as Covid-19 infections rise. The IHS Markit PMI shows private sector growth is also weakening. While, at 54.8, it’s still in growth territory, suppressed customer demand is having an impact.

This is reflected in business confidence too. The National Federation of Independent Businesses’ index reports business optimism at 95.9 in December. This compares to 101.4 in November and the long-term average of 98. It’s the lowest reading since May. The downturn is linked to concerns about sales outlooks and business conditions as the pandemic continues.


China’s economy grew faster than expected in the final quarter of 2020, making it the only major economy to expand last year. Figures released by China’s National Bureau of Statistics show GDP was up 6.5% in the last three months of 2020 following growth of 4.9% in the third quarter.

Remember to keep your long-term financial plan in mind when making investment decisions. Keep an eye on our blog for the latest market updates and more financial news.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.


Why you should review your financial protection when taking out a mortgage

Why you should review your financial protection when taking out a mortgage

Financial protection is often something you’re prompted to think about when buying your first home. It’s an important step to take as you make a large financial commitment. However, it’s just as important to regularly review the level of protection you have. When taking out a new mortgage product, whether it’s your first mortgage, you’re moving home or simply remortgaging, it’s the ideal time to reconsider your financial protection.

A mortgage is one of the largest financial commitments many of us will make, often spanning several decades. Financial protection can help ensure you’re able to meet repayments, even if something unexpected means your income is reduced or stops. Ensuring you have the right level of protection in place for your mortgage and lifestyle can provide peace of mind.

Here are three key reasons why you should review protection when taking out a mortgage.

1. Your outgoings may have changed

Financial protection products are designed to give you peace of mind that you’ll be able to pay for essentials if something unexpected happens. As a result, it’s important to know what your outgoings are to ensure adequate protection. Over time, your outgoings may increase or decrease. If, for example, you’re moving to a larger home that means taking out a larger mortgage, you may find previous protection product no longer provides suitable cover. For first-time buyers, the addition of a mortgage to their regular outgoings may mean they need to consider financial protection for the first time.

2. Your long-term financial commitments may no longer be the same

Over time as your financial commitments change, your protection products should change to reflect this. In some cases, this will mean increasing your level of cover. However, when focusing on mortgages, it can mean decreasing cover too. As you pay off your mortgage, you may find you can reduce your life insurance policy while still benefiting from peace of mind, for example, reducing the premiums you pay too.

3. Your priories may evolve too

Over time, your priorities and concerns are likely to change too. If you’ve welcomed children since taking out a policy or want to start a family in the future, looking at more comprehensive cover can give your family additional security, for instance. This is why financial protection products should be considered alongside your lifestyle plans, including buying a home.

What type of financial protection should you choose?

When taking out a mortgage, life insurance is often considered. While important, it’s not the only protection product that can provide reassurance when you have a mortgage to pay. Here are three options you may want to consider.

  1. Life insurance: When you’re buying a home with a partner, life insurance is a protection product that may be recommended. It would pay out a lump sum on the death of the person or people covered. Usually, a life insurance policy will be linked to the mortgage term and size, to pay off the mortgage if you or your partner passed away. It can relieve one of the biggest outgoings the remaining partner may have, giving them space to grieve without worrying about the mortgage.
  2. Income protection: If you need to take an extended period off work, could you still afford to pay the mortgage? If the answer is ‘no’, it may be worth considering income protection. If you’re unable to work due to illness or an accident, this type of protection product will provide you with a regular income until you’re able to return to work, retire, or the policy term ends. It will pay a portion of your usual salary. It’s a safety net that could help ensure you’re still able to pay for the essentials, from your mortgage to grocery shopping, if something happened.
  3. Critical illness cover: Finally, critical illness cover pays out on the diagnosis of certain illnesses, which are defined in the policy. Rather than paying a regular income, you’d receive a lump sum. This could be used to pay off your mortgage, support day-to-day costs, or make adjustments to your home if necessary. It can give you some freedom by allowing you to reduce or remove expenses, so you to focus on recovery or adjusting.

We all think that we won’t need to make use of protection policies. However, the reality is that thousands of Brits make claims every year, providing them with some financial security when the unexpected happens. Despite the peace of mind financial protection can offer, just 15% of people would list life or health insurance as a top-three priority to protect their financial wellbeing, according to research from EY.

If you’d like to discuss financial protection and how it can provide peace of mind when paying a mortgage, please contact us. There is a range of products and providers to choose from, we’re here to help you find the right one for you.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Capital Gains Tax review: 2 things that could change

Capital Gains Tax review: 2 things that could change

The Office of Tax Simplification (OTS) is reviewing Capital Gains Tax (CGT) after being ordered to by chancellor Rishi Sunak. Changes that are made following the review could affect tax liability and how you make use of allowances. While changes have yet to be announced, there are two key areas that are being considered for modification: the CGT allowance and rates.

What is Capital Gains Tax?

CGT is a type of tax you pay when you dispose of some assets. Disposing of assets could include selling or gifting them. The profit you make may be taxed.

Assets that may be liable for CGT include:

  • Most personal possessions worth £6,000 or more, apart from your car
  • Property that is not your main home
  • Shares that are not held in a tax-efficient wrapper, such as an ISA
  • Business assets.

The chancellor has asked the OTS to: “Identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent.”

While the main aim of the review is to make CGT simpler and fairer, there is also a need to raise revenue. The cost of supporting the economy during the Covid-19 pandemic means the Treasury is left with a deficit. Updates to CGT could go some way to plugging the gap.

The government raises a relatively low amount from GGT; around £8.3 billion a year. Under the current rules, only 265,000 people pay CGT each year, with effective use of allowances and tax breaks meaning many can avoid paying it. However, changes implemented following the review could change that.

The 2 Capital Gains Tax rules that could change
1. The Capital Gains Tax allowance

Under current rules, every individual receives a CGT allowance of £12,300. If the profit you make when disposing of assets falls under this threshold, no CGT is due. Reducing this allowance is one focus of the review.

A small reduction is unlikely to affect many people. In 2017/18, around 50,000 reported net gains just below the threshold. However, the reduction could be more significant. There are suggestions that it could be scaled back to as little as £2,000 – £4,000. For many people, this allowance is an important part of their tax planning and could lead to a higher tax bill than expected.

If you’d be affected by a reduction in the CGT allowance, making use of other allowances will be even more important. For example, selling shares that are held in an ISA, rather than those that aren’t, could help reduce the amount of tax due. Effectively managing the disposal of assets each tax year to make full use of the allowance could also play a role in effective tax management.

2. Capital Gains Tax rates

When CGT is due, how much you pay depends on your Income Tax band and the assets you’re disposing of:

  • Standard CGT rate: 18% on residential property, 10% on other assets
  • Higher CGT rate: 28% on residential property, 20% on other assets.

If you’re not sure what rate of CGT tax you’re liable for, please get in touch.

There are suggestions that the above CGT rates will be brought in line with Income Tax bands. This could mean that higher and additional rate taxpayers face far higher tax bills. It could mean disposing of some assets no longer makes financial sense or that profits would be significantly reduced.

Bill Dodwell, tax director at the OTS, said: “If the government considers the simplification priority is to reduce distortions to behaviour, it should consider either more closely aligning Capital Gains Tax rates with Income Tax rates, or addressing boundary issues as between Capital Gains Tax and Income Tax.”

As with the first point, if this change were brought in, careful management of allowances would become even more important in tax planning. This should be incorporated into your financial plan to reduce tax liability and help you get the most out of your assets.

Reflecting changes in your financial plan

The CGT review highlights why it’s crucial that your regularly review your financial plan. For some people, potential changes to CGT could mean adjustments need to be made in how they hold and dispose of assets to keep goals on track. Continuing with a financial plan that hasn’t considered changes means tax liability could unexpectedly be higher, potentially harming your income or asset growth.

We know that keeping up to date with changes to allowances, tax rates and other areas of finance can be complicated and time-consuming. We work with all our clients to ensure their financial plan consider allowances and more to get the most out of their finances, with frequent reviews to reflect changes.

Please get in touch if you have any questions and to discuss your financial plan.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate tax planning.

Firms cut dividends, what impact will it have on you?

Firms cut dividends, what impact will it have on you?

Companies have faced challenges in the last 12 months and, as a result, many have cut or suspended their dividends. If a portion of your income is made up of dividends, it could affect you.

A dividend is a way of distributing some of a company’s earnings among shareholders. Not all firms pay dividends. Usually, it’s well-established firms with reasonably predictable profits that pay a dividend. It can be a way to create an income from your investments. The annual dividend allowance of £2,000 per tax year can make it a tax-efficient option too.

There are many reasons why a firm may cut or cancel dividend payments. For many firms, 2020 was a difficult environment to operate in and profits are likely to have fallen. This will be the reason behind many dividend decisions in recent months. However, firms may also choose to make changes to dividends if they need to invest in a project or are preparing for a major acquisition.

Over 500 companies listed on the London Stock Exchange made dividend cuts

Highlighting the scale of the challenges businesses battled in 2020 is the number of firms that decided to make changes to their dividends.

On the London Stock Exchange alone, more than 500 companies either cancelled, cut or suspended dividend payments in 2020, according to reports from City AM. This included 52 companies on the FTSE 100, an index for the 100 largest companies in the UK by value. The report demonstrates that it’s not just small businesses that have had their profits significantly affected, but large firms that are often considered relatively secure have too.

It’s a similar picture globally. The likes of Estee Lauder, Carnival, Boeing and Ford have all made adjustments to dividends.

So, will dividends return to ‘normal’ this year?

Some of the pressure faced in 2020 has reduced and as vaccines are given there are hopes that current restrictions will be eased. That being said, the UK is still in a third lockdown and restrictions will likely be scaled back gradually. Other countries are facing similar challenges. While there are positive steps, businesses, especially those within hospitality, will face ongoing obstacles that will affect profits.

While some dividends may resume in 2021, expect adjustments to continue this year and perhaps longer.

What to do if your income has been affected by dividend changes

If dividends make up part of your income, the changes may have an impact on your lifestyle and how you manage expenses. Here are four things to do if this is the case:

  1. Don’t forget your long-term plan. When your income or investment values fall, it can be easy to make snap decisions that you haven’t fully thought through. Remember, you put a long-term plan in place, which should have accounted for volatility and changes, to build a diversified portfolio. It can be tempting to make changes now, but, in most cases, sticking to a long-term plan is the best course of action.
  2. Reduce your outgoings. The most obvious course of action when your income is affected is to reduce your outgoings accordingly. Where possible cutting back on your expenses can ensure a reduction on dividends doesn’t affect long-term plans. However, we know this isn’t always an option, and there are other steps you can take too.
  3. Draw on your rainy day fund. To provide security, you should have an emergency fund held in an accessible cash account. This can help provide an income when dividends are cut or you experience investment volatility. Ideally, this should be enough to cover between three and six months of outgoings. While you may not want to deplete savings, you’ve built up an emergency fund to maintain your lifestyle in circumstances like this.
  4. Give us a call. Depending on your situation, you may be considering accessing other assets, such as an investment portfolio or pension, to make up the shortfall. Before doing so, it’s important you understand the long-term implications and where is best to draw from. This is an area we can help you with. For instance, accessing a pension sooner than expected may not be tax efficient if you have other assets available. We’ll work with you to understand what your options are and weigh up the pros and cons of each.

2020 was a year of ups and downs for investors, whether you’ve invested for growth or income. It’s served as a reminder that volatility does happen, it should be part of your investment strategy. Please contact us to discuss your goals and how to achieve them.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.


Have a promising child? Here is how to build a really robust education fund

Have a promising child? Here is how to build a really robust education fund

The cost of education can be expensive and if you have a child, it’s natural to want to give them opportunities to thrive, whether that’s attending a private school, having support from a tutor, or providing a helping hand when they go to university. As costs rise, creating an education fund can provide peace of mind and help children take advantage of opportunities.

The cost of raising a child is over £75,000

According to research, the cost of raising a child from birth to 18 is £75,436. That’s a significant sum and doesn’t include some of the largest expenses that families face, such as housing and childcare. The costs add up and that’s before you consider paying for additional educational costs. If it’s a priority, taking steps to build a separate education fund can provide some security even if something unexpected happens.

Education costs can run into tens of thousands of pounds a year, so it’s important to plan.

Private school fees vary hugely depending on location, whether they’ll be a day pupil or boarding, the age of the child, and, of course, the school you choose. Parents can expect to pay between £15,000 and £30,000 a year for private school. If you’re thinking about private school, it’s worth reviewing your local options and comparing fees. Remember, private school fees will typically increase as the child gets older and you may want to factor in additional costs, such as music lessons.

It’s not just compulsory education up to the age of 18 you need to consider either. In the last 20 years, the number of teenagers going to university has increased. Around a quarter of all children will secure a place at university with the hopes that it furthers their career prospects. While student loans are an option, you may want to help financially too. University now costs up to £9,250 per year, with the majority of courses lasting three years. On top of this, there may also be housing costs, day-to-day expenses and study equipment to consider.

While you don’t need to create an education fund for a child, it can help them reach their full potential and aspirations. If paying for education is something you’re considering, creating a ringfenced fund can help ensure the finances are available when they’re needed.

Building a robust education fund that matches your plans
1. Setting out your goals

The first step to creating an education fund is to think about what you want to achieve. For example, will it be used to support your child through university? Or do you want it to pay for school fees from the age of five until they’re 18? Or you may want to have the fund to pay for a private tutor to supplement learning at a state school.

Understanding what you want to get out of the fund can help you stay on track. Education can be expensive, and it may be one of your largest outgoings for an extended period, so it’s important to set out your aims from the beginning.

2. Making it part of your financial plan

As mentioned, paying for education can be a significant cost that can last for many years. Making it part of your wider financial plan makes sense. By putting it in your plan, setting up an education fund isn’t an afterthought, instead, it’s a priority. It can help keep your plans on track and give you confidence.

It can also help you to think about how to get the most out of your money and take advantage of tax-efficient solutions. If you’d like to discuss how an education fund can fit alongside day-to-day expenses, planning for retirement and other goals you may have, please get in touch.

3. Choosing the right place to save or invest

Finally, you’ll need to decide how to save or invest for your child’s education. There are plenty of options, allowing you to find one that suits you.

The first question to answer is whether you want to save in cash or invest the money. Both have pros and cons, what’s right for you will depend on the goals you’ve set out. Choosing a cash account means the money is secure and will receive interest, however, inflation can reduce the value of savings in real terms over time. In contrast, investing can help your money grow but it’s exposed to investment risk. Your timeframe, along with other factors, will play a role in which option is right for you. As a general rule, investing should be only considered if you have a minimum timeframe of five years.

In some cases, a combination of saving and investing can make sense. For example, you may use a cash account to save for private school fees but invest for university costs.

You also need to think about where you’ll save or invest. Two options to consider are:

  1. Junior ISA (JISA): A JISA is often used to save on a child’s behalf. The money can be saved or invested and is tax-efficient. The 2020/21 JISA allowance of £9,000 means you can build up a sizeable sum. However, the money won’t be accessible until the child is 18. This can mean it’s a good option for saving for university, but it can’t be used while they’re at school and college. It’s also worth noting that your child would have control of the money when they’re 18 and can spend it how they wish.
  2. Trust: Setting up a trust to use as an education fund allows you to ringfence the money and save or invest. Depending on how the trust is set up, you can manage the assets held within it and access it while they’re still a child, for example, to pay for school each term, trips or extracurricular activities. It’s an option that can provide flexibility but does need careful thought. There are several different types of trust and it can be difficult, or impossible, to reverse decisions you make, so advice should be sought first.

These aren’t the only option. You could use an ISA in your name, for instance, to save or invest while still retaining control over how and when the money will be used. Please contact us if you have a promising child and want to save to provide them with additional educational opportunities. We’ll help you create an education fund that suits your goals and provides security throughout your child’s schooling.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.