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Can I use equity release to pay for care?

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Can I use equity release to pay for care?

Wednesday, June 20th, 2018

It’s one of the scary things about growing old, isn’t it? We’re all living longer, thanks to medical science but does that mean more of us are going to end up in a care home, struggling to find the means to pay for it?

A year in a care home can cost more than £50,000. This means some families are accumulating huge bills. If you have assets of more than £23,250 (slightly more in Scotland and Wales), the law states that you must fund all your care costs yourself, without any help from the Local Authority. This figure includes property, so if you have your own home, you won’t be eligible for any support.

As a result, many families are finding themselves facing a significant gap when it comes to funding care for their loved ones. This added financial burden comes at what can often be a sad and stressful time anyway.

One way some families are funding the cost of care is through the value of their home; equity release or a lifetime mortgage, as it is sometimes known. This allows anyone over 55 to borrow against the value of their home. You can draw money to about 50% of your property’s value and there are no monthly repayments. The interest rolls up at a compound rate until the person borrowing the amount dies. To protect you, the total debt can never exceed the value of your home and will be cleared from the eventual sale of the property.

It’s worth noting that interest rates tend to be higher than standard mortgages but there are no affordability checks or repayment plans. You can decide whether you take the money as a lump sum or in stages.

There are different ways of using equity release. Most people would prefer to stay in their own home for as long as possible rather than move into a home, so one option can be to use the money to make home improvements and adapt the property to their needs as they grow older. Installing a wet room or a moving a bathroom downstairs, for example, can often be practical solutions.

It is more difficult to use equity release to fund care home costs. In fact, according to a Daily Telegraph survey in 2017, only 1% of respondents gave that as a reason, compared with debt repayment, inheritance gifts, home improvements or to boost disposable income. The complexity stems from the fact that the repayment of the loan is often triggered by the very act of someone moving into long-term care. If one half of a couple, however, needed to go into a care home, it does mean that the property would not need to be sold to repay the debt until their partner died or moved into the home with them.

It’s obviously difficult to predict the length of someone’s stay in a care home so equity release may not always be a straightforward decision but, in some cases, it can be a useful option for quick, upfront funding.

June market commentary

Wednesday, June 6th, 2018

Harold Wilson famously said that, ‘a week is a long time in politics.’ A month is a very long time when we come to write this commentary.

Looking back to the first few days of May, the Royal Bank of Scotland was announcing plans to close 162 high street branches in the UK, Facebook said it was going to launch a dating service and, in Europe, there were rumours of a final, final (and this time they really meant it) deal on Greek debt.

But that was all simply froth and noise. The real news came right at the end of May with political crises in Spain and Italy – with the Italian one threatening to become an economic crisis at any moment – and Donald Trump’s sudden announcement of steel tariffs on virtually any country you care to name. May ended with Europe swiftly announcing retaliatory measures and the world once again looking at a damaging trade war.

Unsurprisingly, this had a negative effect on world stock markets, although with the news coming at the very end of the month much of the uncertainty may be reflected in June. Only two of the major stock markets we cover managed a gain during May, with the UK leading the way – albeit only rising by 2%. Most of the other markets were slightly down although, as you will see below, there were two markets which fell significantly.

UK
May was another month with the usual mix of good and bad news in the UK. As we have just noted, RBS kicked off the month by announcing the closure of 162 bank branches. As online banking and mobile apps continue to bite into retail banking you do wonder just how many high street branches there will be in ten years’ time.

The gloom for high streets up and down the country as April proved to be another bad month for the retail sector, with footfall down by 3.3% following the 6% fall in March. Add in the store closures announced by M&S and warnings of thousands of betting shop closures as the Government reduced the maximum stake on fixed odds betting terminals and you question whether town centres as we know them will survive.

There was more bad news for RBS as it agreed to a $4.9bn (£3.65bn) fine from the US authorities for mis-selling and BT announced plans to cut 13,000 jobs – around 12% of its workforce – in an attempt to cut costs.

…But there was plenty to report on the ‘good news’ page. Consumer confidence rose in April, reaching its highest level since January 2017 as wages rose by 2.9% in the first quarter of the year, finally starting to pull ahead of inflation. Unemployment was also down, falling by another 46,000 in the first three months of the year and still at its lowest level since 1975.

There was also positive news in the corporate sector as the Share Centre released data showing that UK corporate profits rose to a record high in 2017 as a buoyant world economy boosted UK multinationals. The profits recorded by the survey – £153bn – were 0.2% ahead of the previous record, set in 2011.

Will those successful companies be paying more for any borrowing in the future? Almost certainly, as the Bank of England hinted at a series of interest rate rises over the next three years. However, inflation fell to 2.4% in April – the lowest since March 2017 – meaning that threats of a rate rise have receded in the short term.

The UK stock market decided this was all good news, and the FTSE 100 index of leading shares was up 2% in May, the best rise recorded by any of the markets we monitor. It closed the month at 7,678 having ended April at 7,509. However, the pound went in the opposite direction, falling 3% in the month to $1.3299.

Brexit
Looking back over my Brexit notes for May they seem to cancel each other out. ‘Tory backbenchers deliver ultimatum over customs partnership’ ran one headline. ‘Jobs at risk without a customs partnership’ ran another. The month ended with suggestions of a ten mile wide trade buffer zone in a bid to break the deadlock over the soft/hard Irish border question.

We are now ten months away from the date when the UK is supposed to leave the EU and still virtually nothing has been agreed. That agreement may be even harder to find after the Republic voted to legalise abortion, leaving Northern Ireland as the only place in the British Isles where abortion is illegal. The DUP remains fiercely opposed to any legalisation – and Theresa May remains fiercely dependent on DUP support, presumably meaning that the DUP now hold a much larger bargaining chip in any discussions on the border.

What a mess. It almost makes Italy look like a model of considered government.

Europe
…Except of course, that Italy is anything but considered. Or stable…

Wishing for a stable government in Italy is probably akin to wishing for an end to the Greek debt crisis, but that is what might happen in June. Later this month a team of EU debt inspectors will arrive in Athens and begin poring over the Greek government’s books. If they like what they see, then apparently Europe’s leaders will settle on a long term plan for Greece to repay the billions of euros it owes.

Were it not for Italy that sort of news might make the headline writers turn to drink, but Italy seems to be a more than adequate stand-in.

For now, the country has a government. Giuseppe Conte, an academic and relative political novice, is the Prime Minister, heading a coalition of the anti-establishment Five Star Movement (M5S) and the far-right League party. It has been dismissed as ‘populist’ – which to this writer at least simply means it won the most votes in the election. It is, though, undeniably sceptical of the EU and how long a coalition between a party that believes in a universal basic income and another that believes in cuts to government expenditure can last is anyone’s guess.

Meanwhile, Spain was losing its Prime Minister after Mariano Rajoy lost a vote of no confidence following allegations of corruption. Plenty of drivers also expressed ‘no confidence’ in their BMW cars, which stalled while they were being driven, forcing the company to recall 300,000 vehicles. And there wasn’t much confidence behind Air France either, as another wave of strikes forced the country’s economy minister to warn that the airline could go out of business.

What of the main European stock markets? Like many markets in this month’s Bulletin, the German DAX index was virtually unchanged, falling just seven points in May to close the month at 12,605. The French market was down 2% at 5,398 but the Greek market tumbled dramatically, down 11% to 756. Does that suggest those debt inspectors may not like what they find?

US
The beginning of the month was ‘business as normal’ in the US. Apple showered its investors with cash as it announced plans for a $100bn (£75bn) share buyback – and said that it had sold 52.2m iPhones in the three months to March.

Legendary investor, Warren Buffet, liked what he saw and bought 75m shares in the company, sending the shares to a record high.

Over at Facebook, Mark Zuckerberg, fresh from surviving the Congressional hearings, said that Facebook would be launching a dating service, and fellow billionaire Elon Musk remained optimistic about Tesla’s future – despite the company posting a record loss of $710m (£523m) for the three months to March. The company’s target is to produce 5,000 electric cars a week – so far, it is producing just 2,270 as it continues to burn cash at an alarming rate.

The wider US economy added 164,000 jobs in April. That was slightly below expectations, but it still saw US unemployment fall to 3.9% – the first time it has dipped below 4% since 2000.

…And then, right at the end of the month, President Trump announced tariffs on imports of steel and aluminium. Among the countries and trading blocs affected were the EU, Canada and Mexico, all of whom announced retaliatory measures. The President said that the move was to secure “‘fair trade” adding, “they are our allies but they take advantage of us economically.”

The retaliation from the EU saw tariffs imposed on a raft of US imports from Harley Davidson motorbikes to bourbon. There were no tariffs on Chinese goods as trade talks continued, but it now appears that the US will impose 25% tariffs on $50bn worth of Chinese imports shortly after mid-June, with Treasury Secretary Steve Mnuchin saying that a final list of goods would be published by 15th June.

The Dow Jones index took all the news in its stride and – along with the UK – was the only other market we cover to rise during May. It was up by just 1% to close the month at 24,416.

Far East
There was bad news for the Japanese economy in May, with figures for the first quarter of 2018 showing that the economy had contracted by an annualised rate of 0.6%, worse than the expected contraction of 0.2%. This was the first time the Japanese economy had shrunk in two years, ending the longest stretch of economic growth since the 1980s.

‘Shrinking economy’ is a phrase which doesn’t appear to translate into Chinese, but the government there did finally agree to ‘significantly’ increase the number of goods it buys from the US. A joint statement between the US and China said the two countries had agreed to ‘a meaningful increase in US agriculture and energy exports.’

The White House added that the move would ‘substantially reduce’ the $335bn (£251bn) annual trade deficit the US has with China – although telling there was no mention of the $200bn (£150m) deficit reduction target that had previously been mentioned. And quite what impact June’s tariffs will have is anyone’s guess…

In company news, Chinese smartphone maker Xiaomi (it’s pronounced ‘show-me’ and it is a brand name you’ll become increasingly familiar with) announced plans for a $10bn listing on the Hong Kong stock market, while TenCent – China’s biggest social media company and now worth more than Facebook – posted a 61% year-on-year jump in profits to $3.7bn (£2.7bn).

It was a quiet month on the region’s stock markets. China’s Shanghai Composite index was up just 13 points to 3,095 while the markets in Hong Kong and Japan both drifted down by 1% to 30,469 and 22,202 respectively. There was less good news in South Korea, where the stock market fell by 4% to end the month at 2,423.

Emerging Markets
It was a quiet month for Emerging Markets news and – for two of the three major markets this section covers – a quiet month on the stock markets too. Both the Russian and Indian markets were unchanged in percentage terms, with the Russian market down just four points to 2,303 and the Indian stock market ending the month up 162 points at 35,322.

There was, though, no such calm in Brazil with the stock market falling 11% to 76,754 and undoing all the gains made so far in 2018.

And finally…
‘Close but no cigar’ probably sums up the final section of our commentary for May. There were some interesting stories but sadly, no security engineers locking themselves in ATM machines or cutting-edge AI robots drowning themselves in swimming pools…

Still, TSB boss Paul Pester would have had an easier month if he had locked himself inside one of the bank’s ATMs. ‘Computer chaos at TSB’ screamed the headlines, in a month which almost certainly saw the bank set a record for the number of times its customers heard, “Your call is important to us, but we are experiencing heavy call volumes at the moment.”

The chaos saw TSB customers given access to pretty much anyone’s account but their own, and one couple were actually able to see their life savings removed from their account while they were kept on hold.

Speaking to a committee of MPs, Mr Pester said that the migration to a new computer system had been “a terrible decision.” He would, he said charitably, be foregoing his £2m ‘integration bonus.’

There was bad news for all of us as the Great British Summer approaches. The cost of vanilla has sky-rocketed over the last two years, meaning that the cost of your ice-cream will be going up. At $600 (£450) per kilo vanilla now costs more than silver: it may be time to invest in mint chocolate chip shares…

In the ‘good news’ column a small town in Carmarthenshire has been named as one of the best places for coffee in the world. Coaltown Coffee in Ammanford (population 5,293) was named on Lonely Planet’s list of best roasteries. So wherever you are in the world, you’ll be able to enjoy Welsh coffee – at least until you-know-who imposes a tariff on it…

What will leaving the Customs Union mean for my business?

Thursday, May 24th, 2018

When we leave the European Union we will also leave the EU customs union. The question we all want to know the answer to is ‘what does that mean for me?’ Well first, let’s have a quick reminder of what the customs union is. In short, it’s an agreement between European member states that there will be no internal tariffs on goods that move between them. Once goods are within the EU, they can also travel freely. This means that administrative and financial barriers to trade within the EU are massively reduced.

So why would we want to leave? The important factor of the customs union in the Brexit debate has been that while you’re in it, you don’t have the freedom to negotiate your own trade deals on goods from other parts of the world. The government insists that such freedom is integral to the success of Brexit.

There are alternative options to a customs union that are being considered, firstly a customs partnership in which the UK collects the EU’s tariffs on goods from other countries on behalf of the EU. If the UK tariffs were lower, and those goods stayed within the UK, then companies would be able to claim back the difference. This would potentially lead to greater bureaucracy and added costs.

Secondly, the idea of a ‘highly streamlined customs arrangement’ has been proposed. The suggestion is that rather than getting rid of checks altogether, they would be minimised. Trusted trader schemes and new technologies would be used to ensure companies make bulk payments for the duties, rather than each time goods cross a border. Of course we also have the issue of Ireland to address. All involved parties have made a firm commitment to keeping an open border between the Republic of Ireland and Northern Ireland. We’re yet to see a suggestion that offers the perfect solution to this delicate issue.

Leaving the customs union could mean increased border checks and supply chains within industry would be heavily affected. Businesses operating ‘just-in-time’ production, such as those in the automotive industry, have multiple goods coming into the UK from mainland Europe every day. Honda, for example, relies on 350 trucks arriving daily; a 15 minute delay to their factory in Swindon would lead to an estimated cost of £850,000.

We are likely looking at higher tariffs. Switzerland and Norway do experience tariff-free access to the EU from outside the customs union but in return, they allow free movement of works and contribute to the EU budget. With immigration being such a large factor of the Brexit negotiations and the UK looking to restrict the free movement of people, it’s unlikely that we will negotiate a similar agreement.

Why is economic growth so poor?

Thursday, May 17th, 2018

The Office for National Statistics (ONS) has announced that GDP growth is down to 0.1% from last quarter’s 0.4%. This means that the first quarter of 2018 saw the UK economy at its slowest growth since 2012.

Rob Kent-Smith, head of national accounts at the ONS, said: “Our initial estimate shows the UK economy growing at its slowest pace in more than five years, with weaker manufacturing growth, subdued consumer-facing industries and construction output falling significantly.”

So what’s to blame for this sluggish rate?

With many economists forecasting a first-quarter growth closer to 0.3%, these figures seem extreme, and there are many factors that have played into them. Brexit uncertainty has played its part; before the referendum, the UK was top of the global growth league of our main industrial competitors, whereas it now sits near the bottom. There haven’t been any abrupt changes concerning Brexit in the last three months, however, to explain this sharp drop in GDP.

Some point to the weather, with the ‘Beast from the East’ and its counterparts affecting the construction sector and causing up to 30 days to be lost on some building sites, thanks to the freezing conditions. The ONS, however, has labelled the impact of the weather as ‘generally small’, with demand even increasing in some sectors, such as energy.

John Hawksworth, Chief Economist at PwC, reminds us that, “these are only preliminary figures and are based largely on estimates rather than actual data for March, when the snow was at its worst. So there could be larger than usual revisions.”

The ONS are suggesting three reasons why the rate is so low. Firstly, construction had a very bad start to the year with a drop in output of more than 3%. Secondly, 2017 saw a strong performance by manufacturing with factory output up 1.3% at the end of the year. A slower Eurozone has led to weaker demand for UK exports. Thirdly, the low consumer spending power is affecting the service sector which accounts for around 80% of the entire economy but only showed 0.3% growth in the first quarter.

Whatever the reasons may be, Philip Hammond is remaining positive. He maintains that the economy has remained fundamentally strong, despite the setbacks that the weather has brought. Time will tell if his positivity continues when further figures become available.

A cautionary tale: the Lazio case

Thursday, May 17th, 2018

Cyber-security is more important than ever before, as Serie A football club, Lazio, found out the hard way in March. After signing Dutch centre back Stefan de Vrij in 2014 from Feyenoord, Lazio agreed to pay his £6.8m fee in installments. Nothing seemed out of the ordinary when they received an email, including bank details, appearing to be from Feyenoord requesting the final payment of £1.75m, so they dutifully sent over the money. It wasn’t until later when Feyenoord hadn’t received the payment and, in fact, claimed to have no knowledge whatsoever of the email being sent, that alarm bells began to ring.

The money has since been traced to a Dutch bank account with no connection to Feyenoord at all. Somebody posing as the club with an official email signature had taken the money and run. Clearly this cyber attack, like most, was driven by the goal of monetary gain and so we can assume that it’s financial teams in organisations that are most at risk of being targeted. The most successful of these infiltration attempts are made by individuals hiding in plain sight, posing as legitimate and well established contacts and targeting more junior employees.

This is why it’s so important for organisations to be aware of these risks and to encourage a culture of education and communication that brings different teams together. An update in company culture and structure such as this needs to be instigated from the top. The Lazio case highlights the fact that financial directors and CFOs need to advocate a proactive discussion about cyber-security across finance and IT departments.

New technologies should also be embraced to help where possible. User and entity behaviour analytics (UEBA) is one example which captures user and login data to build up a profile of usual behaviour. This makes it much easier to recognise an irregularity or data breach, such as an external party getting hold of an employee’s login details.

Ultimately, human error will continue to be a factor so employees need to be made aware of just how easily simple mistakes can be made and what those errors can lead to. Some incidents will remain inevitable but the focus should be on learning and development rather than blame and punishment if companies and individuals are to move forward to a more protected and efficient environment.

The financial advantages of saying ‘I do’

Thursday, May 17th, 2018

A marriage or civil partnership can be a beautiful union of minds and hearts, but there’s no reason why it should end there. There can also be financial benefits to being with your partner, and one of these is the Marriage Allowance. In the 2018-19 tax year, the Marriage Allowance lets you transfer up to £1,190 of your Personal Allowance to your partner, meaning a tax reduction of up to £238, as long as you meet a few requirements.

For the couple to benefit, they must be married or in a civil partnership. The lower earner must have an income of £11,850 or less, and the higher earner must sit in the basic rate tax bracket of between £11,850 and £46,350. It’s worth noting that in Scotland, the higher earner’s salary must be less than £43,430 as the thresholds for basic rate payers differ.

Lower earners can transfer their unused tax-free allowances to their spouse, with the higher earning partner receiving a tax credit equal to the amount of Personal Allowance that has been transferred. The good news doesn’t end there either as the Marriage Allowance can be backdated as far as 5th April 2015. This means that, if you are eligible, you could claim 2015-16’s £212 allowance and 2016-17’s allowance of £220 in this tax year, leaving you with some free cash for you and your partner to treat yourselves.

If you’re currently receiving a pension or you live abroad, your application for the Marriage Allowance will not be affected, as long as you receive a Personal Allowance. However, if you or your partner were born before 6 April 1935, applying for the Married Couple’s Allowance might be more beneficial to you (you can’t claim both at once!).

What does the TSB experience teach us about online banking?

Monday, May 14th, 2018

TSB haven’t had a good time recently, and the same can be said for the nearly 5 and a half million customers who still couldn’t access their accounts after 7 days of technical meltdown. When the bank attempted to migrate some of their services to a new platform, involving the transfer of 1.3billion customer records, those customers were met with an array of problems.

They saw it all, from no access whatsoever, to logging in to their online banking service, to being greeted by accounts which they did not recognise as their own. One customer reported having access to a business account to which they held no affiliation, with a balance of over £2.3m. Despite releasing a since retracted statement, boasting of the ‘capacity of [their] technological management’ of the transfer, Josep Oliu, chairman of TSB owners Banco de Sabadell, was forced to accept the scale and impact of the mishandling.

The real world consequences of such a massive lockout, the size of which we haven’t seen from a British bank since RBS in 2012, are enormous. Although Paul Pester, CEO of TSB, has since taken responsibility of the IT failure and tweeted announcing, “Of course, customers can rest assured that no one will be left out of pocket as a result of these service issues,” it’s too little, too late for some customers. With business accounts being affected, some companies have been unable to pay their staff.

So in a banking climate where over 700 bricks and mortar branches closed last year, and thousands of call centre jobs are being slashed, what are we to do to protect ourselves from the next online blackout? The simple answer might be to not keep all of your money in one place. It’s worth considering opening another account so that if one bank experiences a similar problem, you’re not completely shut out.

If you’ve been affected by the TSB fiasco and want to move to another bank, first make sure you claim any compensation you may be owed by TSB. When claiming compensation, it’s important that you’ve kept a record of each time you were affected, so you’ve got evidence of the full amount you could be due.

5 pitfalls that put your retirement plans at risk

Thursday, May 3rd, 2018

Imagine the scene; you’ve spent your life living frugally, saving efficiently and investing wisely. You enter your well-earned retirement financially secure and excited for the years ahead. The future could pan out in one of two ways; the first could lead to continued security and the financial freedom to enjoy your retirement as planned; the second might lead to the unfortunate disappearance of that security and the resulting stress that would involve.

The sad truth is that the things that lead people down the second path are usually easily avoidable; it’s rarely investment market declines which are the cause of a failed retirement strategy. Here are the five most common pitfalls that you can avoid through careful planning.

1. Helping too much

We all have a natural desire to help our loved ones, but helping too much can lead to harming our own plans. It’s all too common for people to dip into their retirement funds to give money to their children, grandchildren and other relatives. There’s nothing wrong with lending a hand or giving gifts, but you have to know what you can afford and stick to your limits. Don’t be afraid to admit you can’t help.

2. Buying a second home

Having your own little getaway or spending your winters in the sun may seem like a fantastic prospect, but it’s important to be realistic. A huge portion of your retirement capital can be tied up in owning a second home, and there are often unexpected costs involved. In the past you could count on property values to appreciate, but that isn’t true of many areas now. If you want a second home in retirement, make sure you have a substantial financial cushion.

3. Unmanageable debt

Debt can sometimes be considered a financial management strategy rather than something to steer clear of in retirement. Some financial advisers may recommend investing cash to earn a higher return than the interest rate of the debt, instead of paying off the debt altogether. It does, however, come with fixed expenses and if those expenses combine with unexpected expenditures and begin to exceed your fixed income, problems can arise. Avoiding debt during retirement where possible will help avoid financial uncertainty.

4. New business ventures

A lot of retirees choose to continue working and producing income in some way. Many may decide to start new businesses. If this is something you’re considering, be careful and separate most of your retirement assets from the business. Only risk capital that you don’t need to sustain your standard of living as a failing business can erode your nest egg quickly.

5. Absence of a spending plan

One of the easiest mistakes to make is not planning your spending. A lot of retirees don’t know how much money is safe for them to spend in the early years and still ensure they have enough capital to last into their later years. Surveys suggest that people believe they can spend 7% or more of their savings each year safely, however, financial planners and economists say the spending limit is closer to 4%.

Everyone’s optimal spending plan will vary and, ideally, you should revisit your estimates each year to make adjustments. If you have any questions around this topic, please feel free to get in touch with us directly.

May market commentary

Thursday, May 3rd, 2018

Introduction
It looked for a long time that the main headline for this commentary would be the opening salvos in a trade war between China and the USA. The International Monetary Fund published a bullish report on world trade, saying that global growth will hit a 7 year high of 3.9% this year – giving a stark warning at the same time that trade risked being ‘torn apart’ by a protracted trade war.

But then came the news of North Korean leader Kim Jong-un’s, historic visit to South Korea and his meeting with President Moon Jae-in. There followed a bromance which would have been impossible just a few months ago, and a commitment to rid the Korean peninsula of nuclear weapons. The meeting would have been unthinkable at the beginning of the year when North Korea was boasting of being able to reach the US mainland with its rockets: now Pyongyang says it will invite US observers to witness the shutdown of its nuclear site in May.

By the end of the month even the China/US threats and counter-threats seemed to have receded a little and most of the major stock markets which we cover made up losses suffered early in the month on fears of a trade war. There was, however, one significant fly in the ointment as the price of oil continued to climb: Brent crude went past $72 a barrel in light of the continuing troubles in Syria and the instability in the region.

UK
Let’s start the UK section with some really good news: 2017 was a record year for the UK wine industry, as figures showed 64% more bottles of UK-made wine reached the market than in 2016. The Wine and Spirit Association said the industry was reaping the benefits of ‘huge’ investment over the last decade.

…But if April brought good news for wine, it brought yet more bad news for retail as the wet Easter proved a washout for the UK high street, following the bad weather which kept shoppers at home in March. Carpetright announced the closure of 92 stores – and you have to think that the merger of Asda and Sainsbury’s, announced at the end of the month, will ultimately lead to store closures and job losses. There have been plenty of warm words from both sides but it is hard to see that the merger can be good for jobs or, in the long term, for consumers as the number of big supermarket groups in the UK reduces from four to three.

We have commented above on the IMF forecast for world trade: that same forecast included a prediction that UK growth this year would be 0.1% higher than originally thought at 1.6%. HSBC also predicted that UK exports would rise this year by their fastest rate since 2011.

Other numbers for the UK made mixed reading: a slowdown in construction and the effects of the ‘Beast from the East’ meant that UK growth in the first quarter of the year was just 0.1% – the lowest figure since 2012. Mortgage lending was also down, as figures for March showed it falling 2.3% to £20.5bn.

There were some positive figures: wages finally climbed above inflation as the year long squeeze on pay showed signs of ending earlier than expected, and unemployment fell to 4.2% – its lowest level since 1975. And London was voted the world’s top financial centre, finally climbing above New York for the first time in five years.

The vote was presumably taken without reference to TSB: April ended with TSB taking the phrase ‘banking chaos’ to a whole new level. The bank upgraded its systems – inevitably in order ‘to improve customer service’ – and ended up seemingly giving customers access to anyone’s account except their own.

Fortunately, there was no such chaos for the FT-SE 100 index of leading shares. After some lacklustre months, it rose 6% in April to end the month at 7,509. As so often happens, the pound went in the opposite direction, falling 2% to end the month trading at $1.3754.

Brexit
Throughout April, the debate raged about whether the UK should stay in some sort of customs union with the EU after March next year. Doing so would avoid a ‘hard border’ between Northern Ireland and Eire – but would severely limit the UK’s ability to do trade deals with countries outside the EU.

It would, sadly, be possible to write an entire 2,500-word commentary on the various models of customs union – or partnerships – that are currently being discussed: we will attempt to do it in less than 200.

The first option – favoured by the Brexit supporters and known in Whitehall as ‘Max Fac’ (short for Maximum Facilitation) would see the UK and EU agree to minimise all checks, using smart technology and building on best practice from around the world (for example, the USA and Canada do not have a customs union). This means that there would be a border between the UK and the EU, but it would be as light touch as possible.

The second option is a hybrid model – the Customs Partnership – which rests on the EU recognising UK customs checks as equivalent to their own, so that goods entering the EU at say, Rotterdam, could in theory travel on to the EU without further checks.

This appears to be Theresa May’s favoured option, but has been described by hard right Tory Jacob Rees-Mogg, as ‘cretinous’ while the International Trade Secretary Liam Fox, has come out firmly against any form of customs union. With eleven months to go until March 2019, the debate will undoubtedly rumble on: but we have reached the 200 word limit, we promised. Don’t worry, the politicians will undoubtedly still be discussing it next month…

Europe
April was a busy month for French President Emmanuel Macron, who made a high-profile visit to Washington and, earlier in the month, made a speech in Strasbourg calling for ever-closer union between the EU’s member states and, as the EU faced up to the loss of the UK’s contribution, more tax and revenue raising powers for the EU.

Many commentators perceived this as Macron’s bid for the de facto leadership of the EU, with German Chancellor Angela Merkel widely seen to be in a weaker position following her eventual coalition agreement with the Social Democrats. German dominance no longer a safe bet, ran a headline in City AM.

Away from the corridors of power and in the banking halls, the European Central Bank announced it would leave interest rates unchanged, despite the pace of growth in the Eurozone starting to slow. There was bad news from Deutsche Bank, which announced ‘significant’ job cuts as it scaled back its corporate and investment banking operations. Christian Sewing, the new CEO of Germany’s biggest lender, said that the cuts were ‘painful but unavoidable’ as the bank reported a sharp drop in first quarter corporate and investment banking revenues.

Fortunately, there was no pain on the German stock market, as the DAX climbed 4% in the month to end April at 12,612. The French stock market had an even better month as it rose 7% to 5,520 – and there was even good news from Greece, with the Athens stock market up 10% to 858.

US
All the attention at the beginning of the month focused on the war of words – and potential trade war – between the US and China. It ended with the historic meeting in Korea and South Korean President Moon Jae-in suggesting that Donald Trump be awarded the Nobel Peace Prize.

Away from that potential plaudit, the US President had some troubling numbers to contend with. The US trade deficit widened in February to $57.6bn (£42bn) and there are suggestions that the US could have a trade deficit of a trillion dollars a year by 2020.

Jobs growth slowed in March, with just 103,000 jobs created in the month, and there were disappointing figures for the first quarter, as annualised growth slowed to 2.3%. Those figures are unlikely to be helped by suggestions that the US could get as many as four interest rate rises this year, as the Federal Reserve pursues a more aggressive line in a bid to keep inflation under control.

April was, however, a good month for both Alphabet (the parent company of Google) and Amazon as their sales and profits surged ahead. But it was a lot less fun for Facebook’s Mark Zuckerberg: he endured an uncomfortable month as he apologised for his company’s massive data breach at a Congressional hearing. Not a good month for Wells Fargo either, as the bank was fined a record $1bn (£730m) for failing to resolve investigations into car insurance and mortgage lending breaches.

What did the Dow Jones index make of it all? Virtually nothing. Having opened the month at 24,103, the Dow closed April up just 60 points at 24,163.

Far East
The news from the Korean border rather overshadowed China’s news in the month – specifically that the country had seen its economy grow at 6.8% in the first quarter, ahead of the government’s growth target for the year of ‘around 6.5%’ – although obviously, this figure would be under pressure from a prolonged trade war with the US.

In Chinese company news, Didi Chuxing, China’s equivalent of Uber, the world’s largest ride-hailing app and currently reckoned to be worth nearly £40bn, announced modest plans for world-wide expansion.

The Economist Intelligence Unit published an interesting article, listing the countries which were most ready for the robotics revolution: South Korea headed the list, with Japan and Singapore joining it in the top four. (The UK was in 8th place, just ahead of the USA.)

Obviously, the news of the détente between North and South Korea had a positive influence on the region’s stock markets. Only China – perhaps still worrying about a possible trade war – saw its stock market fall during the month, with the Shanghai Composite down 3% at 3,082. Hong Kong went in the opposite direction, up 2% to 30,808 and the South Korean market rose 3% to 2,515. Japan, free of the worry of North Korean missiles flying over its islands, saw the Nikkei Dow rise 5% to close April at 22,468.

Emerging Markets
US sanctions hit Russian shares said a BBC headline in the middle of the month, reporting that sanctions imposed by the US had hit the shares of companies controlled by Russian oligarchs, ‘as the Russian stock market tumbled in the wake of the sanctions.’ This followed the diplomatic crisis sparked by the poisoning of former spy Sergei Skripal and his daughter, and President Trump’s threats of tariffs on aluminium and steel.

Well, sanctions or no sanctions the Russian stock market had recovered by the end of month, closing April up 2% at 2,307. There was an even better performance from the Indian stock market, up 7% in April to end the month at 35,160 – and Brazil completed our Emerging Markets hat-trick as the market there rose 1% to close at 86,115.

And finally…
April was a good month for the ‘And finally’ section of the commentary – but we start with something that is probably best not read while you are eating breakfast.

NASA, America’s space agency has been looking for a material that can be transported into space and used for the spare parts that are inevitably needed on a long space mission. The idea is that the parts would be made using a 3D printer: but what material to use? The rocket scientists at NASA have decided that, well… human waste would be ideal. Transported into space and put to use: that’s an idea that Major Tom never discussed with ground control…

There had been widespread rumours of an exodus of London’s leading bankers after Brexit. Apparently, that is not now going to happen. A report in Politico said that the bankers’ wives – and one husband – had been to inspect Frankfurt, the rumoured new banking capital of Europe, and found it to be ‘dark, grey and dull’. So there you are: David Davis and Michel Barnier can huff and puff all they like – in the end it looks like bankers’ wives will decide the shape of Brexit.

Sadly, one wife who had rather less influence was the wife of Tanzanian gambler, Amani Stanley. So sure was Amani that his beloved Manchester City would clinch the Premier League title by beating Manchester United at home that he bet his wife on the result. All was looking good when City were leading 2-0 at half-time. Unfortunately, United stormed back in the second half to win 3-2 and Amani lost his wife for a week to his United supporting friend Shilla Tony. As yet there is no news on her husband’s gambling from Mrs Stanley…

What does GDPR mean and how does it affect me?

Wednesday, April 18th, 2018

GDPR is one of those acronyms you’re probably hearing a lot about at the moment. You’re no doubt receiving a high number of emails asking if you’re still happy to receive communications from a company and to be on their database. So what are the reasons behind this?

In 2016, a bill was passed by the European Union introducing the Global Data Protection Regulation, which will come into force as of 25th May 2018. GDPR defines the legal rights of EU citizens in relation to their data, and enforces regulations on the data controllers and processors who hold that data.

Under GDPR, organisations will find themselves in one of two categories; data controllers and data processors. Controllers are those who ‘determine the purposes for which and the manner in which any personal data are, or are to be, processed’ and processors are those (other than an employee of the data controller) ‘who process the data on behalf of the data controller’.

The definition of ‘personal data’ applies to any information that can be used to identify a person, either directly or indirectly. That includes a subject’s name, location, IP address or mobile device identity, and any organisation that holds the personal data of any EU citizen must ‘implement appropriate technical and organisational measures’ to protect that data.

Any organisation holding EU citizens’ data will need to tell you how your data will be processed. There are 6 different lawful bases for this which are outlined for organisations as below:

1. Consent: the individual has given clear consent for you to process their personal data for a specific purpose.

2. Contract: the processing is necessary for a contract you have with the individual, or because they have asked you to take specific steps before entering into a contract.

3. Legal obligation: the processing is necessary for you to comply with the law (not including contractual obligations).

4. Vital interests: the processing is necessary to protect someone’s life.

5. Public task: the processing is necessary for you to perform a task in the public interest or for your official functions, and the task or function has a clear basis in law.

6. Legitimate interests: the processing is necessary for your legitimate interests or the legitimate interests of a third party, unless there is a good reason to protect the individual’s personal data which overrides those legitimate interests (this cannot apply if you are a public authority processing data to perform your official tasks).

As the 25th May deadline approaches, we’re sure you’re coming into contact with a number of different organisations who are communicating their own GDPR journey with you. This can sometimes feel overwhelming but it’s important to note that although organisations will communicate with you in different ways, they will all be working to the same lawful bases.

If you’re interested in learning more, we recommend consulting the Information Commissioner’s Office Guide to the General Data Protection Regulation which can be found here.