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Are you leaving your retirement planning too late?

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Are you leaving your retirement planning too late?

Wednesday, June 1st, 2022

For many of us, old age and retirement can feel a long way off, and with the world seemingly lurching from crisis to crisis, many of us are focused on simply getting through the next few days and weeks, rather than looking too far ahead.

However, that approach could simply store up problems for the future, which is why we’d urge anyone to start planning for their retirement as soon as possible.

According to a new study by Hargreaves Lansdown, one in five people said they would leave planning their retirement until they’re aged 60 or above.

The same survey showed that one in five people would only begin retirement planning at the age of between 30 and 39. Similarly, just one in seven people said they started planning for retirement when they were aged between 18 and 24.

So what does this mean for future retirees? Well, it’s a fact that the sooner you start putting money into your pension, the more time you have to build up a sizeable sum that should see you through your retirement.

Conversely, if you start too late, you’ve got a very short space of time in which to build up a retirement fund, which could hugely affect your ability to lead the lifestyle you want to enjoy after you finish working.

And if you start projecting your likely pension income in retirement, you may find that you don’t have very long in which to make up any shortfall.

Commenting on the figures, Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, acknowledged that it can be “easy to put off planning until the last moment”.

However, she insisted that pensions were a “long-term game”, which means action needs to be taken sooner rather than later.

“It’s worth taking the time earlier in your career to think about what kind of retirement you would like and put a plan in place to help you achieve it,” Ms Morrisey commented.

A lack of financial knowledge and education about pensions and retirement could be one big reason why so many people are kicking in the can down the road.

In fact, according to a YouGov survey, commissioned by Drewberry, 41 per cent of people with a workplace pension don’t actually know what they’re paying in and what they’ll get from it when they retire.

More than half of those polled also said they’d like to know if they’re saving enough for retirement, and significantly, one in three believe their employer should pay for them to discuss retirement planning with a financial adviser to get a better understanding of their finances.

Whether a lack of financial education leads to people ignoring and putting off financial planning is a constant topic of debate in the financial services industry. But it’s clear that more needs to be done to engage with both employers and savers on this issue, so people are properly set up for later life, and the fear factor that surrounds pension planning is taken out of the picture.

Interestingly, 87 per cent of the people polled by YouGov said they pay into a workplace pension, while 56 per cent said the provision of a workplace pension is important to them when they’re looking for a new job.

That suggests that many people do want to lay down the groundwork to secure a happy and prosperous future, but don’t necessarily know how – and that’s where making financial advice available and accessible becomes so important.


Is Inflation Heading Past 10%?

Wednesday, June 1st, 2022

As inflation soars to a 40-year high, many analysts, households and businesses are asking just how much higher could it go?

The rate of Inflation jumped from seven per cent in March to nine per cent in the 12 months to April, and according to the Bank of England, it’s likely to keep going up over the next few months, possibly to as much as ten per cent, but should fall again in 2023.

This, it said, is because the causes of the current high rate of inflation, such as Covid-related lockdowns in China leading to supply chain problems, aren’t likely to last. As a result, the Bank believes inflation should be close to its target of two per cent in about two years’ time.

However, it warned that the prices of some items might stay at a high level, when compared with recent years. That means the cost of living struggles, which so many people are experiencing right now, could persist if wage growth doesn’t match inflation.

“If prices go up but your income stays the same as it was a year ago, you’ll notice it won’t go as far as it did then,” the Bank said.

“You will be able to buy less of some things with the same amount of money than you did before. But how much costs change will vary. The cost of some things will go up more than others.”

The Bank of England is clearly walking a precarious tightrope and needing to balance many complex variables, but since many of these are outside of its control, it’s impossible to say with any certainty just how inflation will rise and how long this problem will last.

Andy Haldane, former chief economist at the Bank of England, recently told LBC: “This won’t be come and gone in a matter of months. I think this could be years rather than months.”

Furthermore, he predicted that there was a “better than evens chance” that the UK could fall into recession in the near future, saying: “We could find ourselves heading south rather than north”.

So what can the Bank of England do? The Bank’s Monetary Policy Committee recently raised interest rates from 0.75 per cent to one per cent – their highest level for 13 years.

However, opinion on what to do next is split, with Michael Saunders, a member of the Monetary Policy Committee, believing the best way to deal with rising inflation is to implement faster interest rate hikes.

Mr Saunders, who was among those who recently voted for a 0.5 per cent increase in interest rates, said: “The strength of external costs is eroding real incomes and is likely to cap real spending.

“But, by creating a long period of above-target inflation, these external cost increases also may exacerbate the rise in inflation expectations and hence, with the tight labour market, could make it harder to ensure domestic inflation pressures return to a target-consistent pace.”

Speaking to the Resolution Foundation, Mr Saunders argued that the Bank should move to “a more neutral monetary policy stance”, adding that its credibility could be harmed if inflation rises out of control.

As calls grow for politicians and fiscal policymakers to do more to address the cost of living crisis, inflation passing the ten per cent mark would be a hugely symbolic moment that could pile on the pressure even further.

We will keep you informed as to what decisions are taken, and in the meantime, if you have any questions or concerns, don’t hesitate to contact us.



Buy-to-let landlords see surging mortgage costs

Friday, May 20th, 2022

The buy-to-let market has made a strong bounceback from the pandemic, with demand for rental accommodation soaring in many parts of the country, in particular student hotspots such as Manchester.

But while investing in buy-to-let still offers attractive returns, landlords are still facing rising costs, especially when it comes to paying mortgages.

According to new figures from Property Master, monthly costs on a typical five-year fixed rate buy-to-let mortgage for £160,000 with a Loan to Value (LTV) of 60 per cent have increased from £346 to £359 since the start of 2022, or £13 a month.

Meanwhile, monthly costs on a typical two-year fixed rate mortgage for £160,000 with a Loan to Value (LTV) of 60 per cent have increased from £351 to £365, or £14 a month.

Angus Stewart, Chief Executive of Property Master, described the increase in the cost of buy-to-let mortgages as “relentless”, and warned the current “turbulence in the money markets” is making it harder for some lenders to raise the funds.

This, he said, means there is “a fear that as well as higher mortgage costs, landlords may also face reduced choice”.

“Whilst it is true that buy-to-let mortgage costs may look low from an historical point of view, the increases we are seeing now come at a very bad time,” Mr Stewart commented.

“Increased taxes and regulation have already chipped away in recent years on the returns landlords can hope to make.”

But while the prospect of higher mortgage repayments lies in store for rental landlords, it’s far from doom and gloom in the buy-to-let mortgage market.

Number of BTL mortgages being issued is rising

Despite increases in the cost of buy-to-let mortgages over the last few months, it’s clear that people investing in rental property continue to see the market as a strong investment option.

According to new data from Knight Frank, 275,600 buy-to-let mortgages were issued in the year to February 2022. This includes 159,100 remortgages and means the number now stands at a six-year high.

Figures also showed that the number of new mortgages taken out by buy-to-let landlords rose to 110,000 during this period, up from 75,8000 in the year to February 2020. These were taken out both by investors expanding their portfolio and those entering the buy-to-let market for the first time.

The attractiveness of the market to new and existing investors has been fuelled partly by increasing rental rents, which have outpaced house price increases in some parts of the country.

In fact, Knight Frank has estimated that rental values across the country could go up by more than 17 per cent over the next five years, and the rate of increase could be higher still in the main hotspots of activity.

Meanwhile, latest figures from Hamptons show that more than one in ten properties sold across Great Britain between January and March 2022 were purchased by buy-to-let investors.

Landlords bought 42,980 homes during the first quarter of the year, which equates to 13.9 per cent of properties purchased during this period.

Nevertheless, Hamptons pointed out that tax and regulatory changes have prompted more landlords to sell up in recent years, and that there are now around 300,000 fewer privately rented homes in Great Britain today than in 2017.

So while the picture in the buy-to-let market is clearly mixed, it’s apparent that savvy investors can still earn healthy returns on the right properties in the right areas, which could more than make up for rising mortgage costs.

How bad could it be for UK Businesses?

Friday, May 20th, 2022

We all know that there are only two certainties in life – but at the moment there appears to be a third: negative stories in the media about the outlook for UK businesses. 

Clearly times are difficult at the moment. The pandemic has been followed by supply chain issues and inflationary pressure, both compounded by the war in Ukraine. It has certainly given the headline writers plenty of ammunition, with City AM forecasting a ‘profit squeeze as inflation bites’ and following that by suggesting that small firms face a cost ‘assault’. 

Not to be outdone, the BBC declared there was a ‘big jump in the number of firms at risk’ and that UK businesses faced a ‘perfect storm’ as the recent tax rises kicked in. Even the CBI joined in, saying that firms would ‘need help to make it through the summer’. 

At this point any right-thinking businessman or woman would surely take the only logical step – pull down the shutters and put the business up for sale. 

It is worth pointing out though, that journalists are not entrepreneurs. They do not see the world in the same way. As the old cliché has it, the Chinese character for crisis is made up of two other characters – danger and opportunity. 

That’s not correct but, like all clichés, it carries an element of truth. Yes, there are supply chain problems – but does that represent an opportunity to bring manufacturing back to the UK? ‘Re-shoring’ as the management term has it. 

Yes, there are cost pressures on profits – but entrepreneurs won’t be writing articles about it, they’ll be looking at their budgeting and their key performance indicators and taking whatever action is necessary. 

It’s interesting to note that the FTSE-100 index of leading shares has proved resilient to the bad news, both about the war in Ukraine and the stories in the media. In April, major stock markets in Europe, the US and the Far East all fell: the FTSE held its own, with a small gain of 29 points in the month. 

So maybe the news isn’t quite as bad as the media likes to portray. We have some brilliant businesses in our client bank and we’re proud to be financial planners for both limited companies and sole traders. Anecdotally, many of our SME and self-employed clients are positive and optimistic about the future. They’re certainly working hard and – as we have always done – we’ll do everything in our power to support them. 

Leave a Gift to Charity to Reduce Your Inheritance Tax Bill

Monday, April 25th, 2022

As the saying goes, you can’t take your money with you when you die, so it’s only natural that you might want to leave your wealth to those people closest to your heart, such as your children.

But this isn’t the only option open to you, as you can leave your money to a cause that means a great deal to you – and this can have significant benefits when it comes to inheritance tax.

Any gifts you make to charity are exempt from inheritance tax, so if you leave everything to a good cause, your estate wouldn’t have to pay it at all. However, very few people take up this option, as many will still want to leave a generous amount to loved ones.

But even in that case, there are still inheritance tax benefits to be had. If you bequeath more than a tenth of your estate to charity, the total amount of inheritance tax the estate pays will be 36 per cent, lower than the standard rate of 40 per cent on everything over £325,000, or £650,000 for a married couple.

Support a Cause You Care About

Donations made from people’s Wills can be a valuable source of income for countless charitable bodies, so if you want to explore this option, it’s worth spending time thinking about what cause or causes matter to you.

If you’re an animal lover, maybe a national or local animal charity could be a good option.

If you or a loved one has struggled with a long-term illness, such as cancer, you might want to donate to a charity that helps others with that condition, or perhaps a hospice that cares for those with terminal illnesses.

You might even want to support a museum or another cultural institution, or maybe a local community group.

The choice is yours, which means that your Will gives you a great opportunity to leave a positive legacy in an area you care about, or say thank you to a charity that has helped you personally or supported a loved one.

Speak to Your Family and Get Financial Advice

Before you write or update your Will with a view to leaving a gift to a charity, it might be worth speaking with members of your family beforehand.

Many of your family members might be hoping or expecting to receive an inheritance from you, so explaining the reasons behind your decision can help to prevent any upset or family disputes further down the line.

You should also consider speaking to a financial adviser if you are thinking of gifting to charity as part of your estate planning, so they can discuss the inheritance tax implications with you.

A regulated, professional adviser will also be able to talk you through other ways of making sure your estate planning is more tax-efficient.

What Can I Leave to Charity?

You can leave either a set amount of money or a particular item to your charity of choice. Alternatively, you can ask the executor of your estate to take care of awarding a set sum to a charity after other costs have been paid out and gifts to family members distributed.

It’s often said that the only two certainties in life are death and taxes, but with careful planning, there’s no reason why you can’t reduce your inheritance tax bill and leave a positive legacy behind. Please don’t hesitate to get in touch with us if you have any questions about making your estate more tax-efficient.

The Amazon Brushing Scam. And Friends…

Thursday, November 18th, 2021

Have you been ‘brushed’ yet? If not, it’s quite possible that you soon will be…

What are we talking about? The latest in a seemingly never-ending series of scams to hit people.

According to consumer group Which?, hundreds of thousands of people up and down the UK have received mystery parcels from Amazon, containing goods that they didn’t order, in a scam known as ‘brushing’.

Which? says that the sellers of these unwanted items are looking to exploit Amazon’s ranking system – which favours items with high sales volumes and good reviews – by sending items to people who simply didn’t order them. They will then often take the scam a stage further by creating a fake Amazon account linked to the recipient’s address, and leave a glowing review of the product that’s just been ‘ordered.’ 

At this point you may be thinking, ‘what’s it matter if I receive something I didn’t order? I’ll just keep it (according to Which? 63% of people do just that) or throw it away’.

…Except that someone has found your address – and created a fake account linked to that address. They’re clearly unscrupulous, so are they going to think twice about selling the personal details they have? Of course not. 

We have written about scams previously and no doubt we will do so again. The pandemic – and the subsequent lockdowns – brought out the very best in millions of people. Sadly it also had the opposite effect, as the number of scams and frauds exploded. 

It is hard to put a figure on how much is lost through fraud each year, simply because so many victims are too frightened or embarrassed to report it. This may be especially true in areas like romance scams, with people simply too ashamed to admit that they have been duped. 

As long ago as 2017, the National Crime Agency put the total figure lost to fraud at £140bn a year, and credit agency Experian suggested it was even higher, at £193bn. Whatever the true figure, what cannot be under-estimated, is the human cost of fraud, and the erosion of trust it causes. 

Which? tried to put a figure on it, suggesting the costs to victims’ wellbeing could be as high as £9.3bn a year – the equivalent of £2,500 for every victim. They suggest that while the typical amount lost is around £600, the emotional cost is much higher, with many victims suffering from anxiety and ill-health after being scammed. 

Clearly something like this is difficult to quantify, and the impact will vary considerably with individual people. What is undeniable though, is that scams and fraud will only go on increasing, and that they will continue to target the most vulnerable. 

Whether it is the text telling us that the post office couldn’t deliver a parcel, the Inland Revenue supposedly threatening us with prosecution or ‘track and trace’ asking for our details, we all need to be permanently alert – and suspicious. And as we start to do our Christmas shopping online, it is perhaps time to update the old maxim. If it seems too good to be true, it is too good to be true – and if the reviews seem too good to be true, they almost certainly are too good to be true…

Will COP26 Affect my Savings?

Wednesday, November 10th, 2021

There cannot be anyone reading this article who hasn’t heard of COP26, the conference on climate change and global warming which is taking place in Glasgow in the first two weeks of November. (If you didn’t know, COP stands for Conference of the Parties – those countries which signed the original UN Convention on Climate Change in 1994). 

All our clients will have their own views on climate change and the Conference. Some will agree with Boris Johnson’s assertion that it is “one minute to midnight” for the planet: others may be slightly more sceptical, wondering why attendance at a conference on climate change needs 400 private jets – between five and 14 times more polluting than commercial airliners – flying in and out of Glasgow. 

This is not the place to discuss the merits of those arguments – but perhaps it is the place to ask another question. What effect – if any – will COP26 have on my savings and investments? 

Three days into the Conference, it was widely reported that most big UK companies and financial institutions will soon be required to show how they will hit climate change targets. “The rule book will be re-written for net zero,” said Chancellor Rishi Sunak, referring to the UK’s stated aim of reaching ‘net zero’ (a balance between the carbon a country or business is emitting and the carbon it is removing from the atmosphere) by 2050. 

By 2023, companies will need to set out detailed plans for how they will move to ‘a low carbon future’. “The aim is to increase transparency and accountability,” said the Government, adding that it was not “making firm-level net zero commitments mandatory”.

…Not yet, anyway. You suspect that in the future that may very well be a piece of legislation that finds its way onto the statute books. Add in the increasing pressure on companies to comply with ESG (environmental, social and governance) requirements and you suspect that in the future, a company’s results may be reviewed for a great deal more than the bottom line. 

‘Impact Investing’ – investments made with the intention of generating positive environmental and societal change alongside a financial return – is growing rapidly, especially among younger investors. Whatever their feelings about the environment, companies may well find themselves with little choice other than to meet the demands of legislative change and/or pressure from potential investors. 

The simple answer to the question we posed is that COP26 – or even COP27, which will be in Egypt’s Sharm El Sheikh – may have little immediate effect on your savings and investments. But the mood of legislators and campaigners is clear: companies will need to change what they do and how they report results to investors. 

That will be a challenge for the companies – as well as fund managers and investment managers. They’ll need to consider a lot more than profitability, market share and future growth prospects. But as all our clients know, we work with some of the very best fund managers there are, and we’re in regular contact with them, making sure that your savings and investments stay on track to meet your long term financial planning goals. 

The Budget: Marks out of Ten…

Wednesday, November 10th, 2021

Rishi Sunak, the Chancellor of the Exchequer, delivered his second Budget speech of the year on Wednesday October 27th. It was, he declared at the start of the speech, “a Budget for a new age of optimism”. He sat down an hour later with Conservative backbenchers furiously waving their order papers as he promised “a stronger economy for the British people” and even – despite committing to an extra £150bn of spending – promising to cut taxes in the future. 

As always with a Budget, the immediate reaction was mixed. The phrase ‘did not go far enough’ was never far from the lips of the special-interest spokesmen. The New West End Company – a partnership of more than 600 businesses around Bond Street and Oxford Street – welcomed the moves on business rates, but complained that they went “nowhere near” meeting manifesto commitments. 

The hospitality industry welcomed the cut in beer duty and the simplification of alcohol taxes – but worried about the increase in the National Living Wage and its impact on staffing costs. 

Gradually, though, the criticism became more detailed. Paul Johnson, Director of the Institute of Fiscal Studies (IFS), said that “deep in the bowels” of the Budget was an expectation that household disposable income would be “almost stagnant” over the next five years, growing by just 0.8% each year. The tax burden would continue to increase, said the IFS, stating that there was now “clear blue water between now and any time in the past”.

The headline writers put it in rather more simple terms, with many pointing out the increased tax burden on the average family.  

There was criticism of the tax burden even from within the Conservative party. Former minister Michael Portillo said: “This is not Conservative philosophy. This is what Conservatives absolutely do not believe in. It is, I think, a bit of an identity crisis for the Conservative party.” 

Neither was business happy: ‘a Budget packed to the rafters with promises and light on the means to pay for them’ was one verdict quoted by City AM. Tony Danker of the CBI said that the Budget “did not go far enough to deliver the high investment, high productivity economy the Government wants.” An article in Spiked accused the Chancellor of ‘ducking the challenge entirely,’ and concluded: “The Chancellor has neither the plan nor the willingness to get [the UK] to the high-wage, high-productivity economy we so desperately need.” 

There was plenty more along the same lines: a general feeling that the Chancellor was simply ‘muddling through.’ So should our clients worry? There is no question that the UK is facing some serious challenges at the moment, with energy costs seemingly increasing every week and a forecast from the Bank of England’s new chief economist that inflation could reach 5% next year. No-one would bet against the Chancellor being back in March with a new set of figures and forecasts. 

So now, more than ever, it is the time for good, consistent, long-term financial planning and regular contact with your financial advisers. Rest assured that we will always keep you up to date with whatever happens in the national and global economies, and that we are always here to answer any questions you might have.

November Market Commentary

Wednesday, November 3rd, 2021


October was the month which brought us Chancellor Rishi Sunak’s second Budget of the year. Normally that would make the headlines, but October was also a month when the world gave us plenty to worry about. 

With factors such as rising energy prices and supply chain issues impacting economies worldwide, the UK’s economic outlook may well be heavily dependent on events beyond the Chancellor’s control.

Rishi Sunak had described his Budget as one for a “new age of optimism”: one that would deliver “a stronger economy for the British people”. But in China, the price of coal was rocketing, factory gate prices reached their highest level for 26 years and the country missed all its key economic targets for the third quarter. 

Growth for the July to September period slumped to 2% in the US, and the German government sharply cut its growth forecast for the year, citing “supply bottlenecks and high energy prices”.

There was also plenty of political unrest in the month. Tension between China and Taiwan was described as ‘the worst in 40 years,’ with Chinese leader Xi Jinping issuing a thinly-veiled ‘keep off’ message as he described plans for re-unification as an “entirely internal” matter. 

China fired a hypersonic missile round the world in a move which appears to have taken the US completely by surprise. North Korea sent a ballistic missile into the sea off Japan in a move which surprised no-one at all. And US President Joe Biden told new Japanese Prime Minister Fumio Kishida that the US would defend the disputed Senkaku Islands in the event of an attack by China. The islands – which are uninhabited – are currently controlled by Japan but claimed by both China and Taiwan. 

The month did end with some semblance of global harmony, as world leaders at the G20 summit in Rome endorsed a deal on a global minimum corporation tax rate of 15%, which will be enforced from 2023. 

So another month when there was plenty of news to digest. As always, let’s look at all the details…


As noted above, Rishi Sunak delivered his second Budget speech of the year on Wednesday October 27th. It was, in some ways, a strange speech. As you will know by now, he committed himself to an extra £150bn of spending, with the inevitable higher taxation to pay for it. Then he suddenly changed tack at the end of the speech, talking about a ‘moral challenge’ facing the country, his own dislike of higher taxes and making a pledge to reduce taxation in the future. 

He sat down with Conservative backbenchers enthusiastically waving their order papers, but the Budget split opinion on all sides of the political spectrum. The left described it as a ‘bankers’ benefit’, while the right criticised what it saw as excessive spending and taxation. The Institute of Fiscal Studies made it very clear that the tax burden would continue to increase, stating that there was “clear blue water between now and any time in the past”. Looking further ahead, they saw little increase in household disposable income, which would be “almost stagnant” over the next five years, growing by just 0.8% each year. 

Many business groups also criticised the Budget, with Tony Danker of the CBI saying that the Budget “did not go far enough to deliver the high investment, high productivity economy the Government wants”.

The month opened with the news that business confidence had ‘fallen off a cliff’ in September, as supply chain problems, rising energy costs and the shortage of fuel all combined to drive up prices.

However, there was some good news around in October. Figures for August showed that the economy had grown by 0.4% in the month as more people ate out, went on holiday and – wellingtons at the ready – attended music festivals. 

Government borrowing fell in September: at £21.8bn it was the second-highest September figure on record, but was £7bn less than in September 2020. Inflation in September dipped slightly to 3.1% from the 3.2% recorded in August, although the relief may only be temporary. 

Huw Pill, the Bank of England’s new chief economist, warned that inflation is likely to hit, or surpass, 5% early next year – and said that the Bank had a “live decision” to make on interest rates at its rate-setting meeting on November 4th. The food and drink industry added weight to the argument, with Federation boss Ian Wright telling MPs that inflation is between 14% and 18% for hospitality firms – and that it will inevitably lead to price rises for consumers. 

What of jobs? There were plenty of stories of companies taking on new staff in the month, with Addison Lee, London’s leading private hire firm, looking to take on 1,000 new drivers, which hopefully says something about the economic recovery in the capital. More generally, the Recruitment and Employment Confederation reported in the middle of the month that there were now 2.29m job vacancies, with more than 600,000 being added since the last week of August. The growth has been spread across the country, said the REC, making competition for staff ever more fierce. 

The month ended with two pieces of good news on the jobs front, both centred on the north-east. Envision, the Chinese firm behind Sunderland’s ‘gigafactory’ announced a huge expansion – with the factory’s capacity increasing sixfold – as it looks to bolster its electric battery division. Not to be outdone, Saudi chemicals giant Sabic announced that it was to invest nearly £1bn at its Teesside plant in a move that will create and protect 1,000 jobs. 

The FTSE-100 index of leading shares had a good month, rising 2% to end October at 7,238. The pound was up by a similar amount against the dollar, closing the month trading at $1.3689. 


We mentioned the twin threats of power shortages and inflation in the introduction, and they were certainly in evidence in Europe. 

October started with the news that inflation in the Eurozone had soared to a 13-year high, with figures from September showing inflation had risen to 3.4% from 2% in the previous month, the highest figure since September 2008. 

There was perhaps even worse news to end the month, as the German government cut its growth forecast for the year from 3.5% to 2.6%. Economy Minister Peter Altmaier cited energy costs and problems in the supply chain – especially for semiconductors – as the reason. “In view of the current supply bottlenecks and high energy prices worldwide, the hoped-for final spurt will not happen this year,” he said, before adding that in 2022 “the economy will gain momentum significantly”.

In between these gloomy bookends, there was more bad news for the car industry, which is now threatened by a shortage of magnesium. Europe imports 95% of its magnesium (which is used to strengthen aluminium) from China and, according to Bloomberg, could run out by the end of November, threatening millions of jobs in sectors from the car industry to aerospace and defence. 

There was some consolation for the beleaguered car industry when Volvo (now owned by China’s Zhejiang Geely Holding Group) saw its shares jump from £4.50 to £5.10 on its £13bn debut on the Stockholm stock exchange. The company had hoped to raise £1.7bn from the listing as it gears up to become fully electric by 2030. 

On the political stage, disagreements between the EU and Poland over whose law takes precedence continued. Social Democrat Olaf Scholz remains the favourite to succeed Angela Merkel as German Chancellor, and a new name was whispered for next year’s French Presidential election. Right-wing commentator and essayist Éric Zemmour has not yet officially entered the race, but a recent poll put him ahead of Marine Le Pen as the likely challenger to President Macron. 

Europe’s politicians – and economists – would have ended the month mulling over the latest growth figures for the Eurozone. Figures for the third quarter showed growth of 2.2% in the 19 countries that make up the Eurozone. This was ahead of expectations but inevitably gave rise to worries about further inflation, which was expected to hit 4% for October. 

The region’s major stock markets were, however, in an optimistic mood. Germany’s DAX index shrugged off any worries with a 3% rise to 15,689 while the French stock market did even better, gaining 5% in the month to close at 6,830. 


As we reported last month, September was a poor month for US stock markets, with the Dow Jones index falling 4% and the S&P 500 down 5%, in what was the markets’ worst month since March 2020. 

October saw them regain the lost ground – and more – in a month which brought us the third quarter figures from the major tech companies. While they reported some very large numbers, however, third quarter growth for the wider US economy was down to just 2% (from 6.7% in the previous quarter) in the face of supply chain problems, rising inflation and further Covid restrictions in some states. 

The month started with the news that the US had added a disappointing 194,000 jobs in September, although the unemployment rate fell from 5.2% in August to 4.8%. There are currently 7.7m people out of work – a significantly higher number than before the pandemic. 

Electric car maker Tesla was much in the news. It revealed record quarterly sales and profits for the third quarter: revenues rose to $13.76bn (£10.05bn) as it sold more than 240,000 cars, with profits rising to $1.6bn (£1.18bn). A deal to sell 100,000 to Hertz saw the share price leap and made Tesla the fifth company to reach a $1tn (£730bn) valuation. 

Google, of course, has already reached that landmark and announced a third straight quarter of record profits. Revenues for the July to September period were ahead of Wall Street expectations at $65.5bn (£47.8bn) with the company reporting a net profit of $18.9bn (£13.8bn). 

Facebook posted profits of $9bn (£6.6bn) for the period, although the row over leaked documents and unethical behaviour from the company rumbled on. Facebook also announced that henceforth its holding company would be known as Meta – reflecting Mark Zuckerberg’s commitment to developing the Metaverse, the virtual reality future he seems intent on steering us all towards. 

The name ‘Meta’ apparently comes from the Greek word for ‘beyond.’ It’s also the Hebrew word for ‘dead.’ Let’s hope it is the former Mr Zuckerberg is steering us towards…

The only one of the tech giants to disappoint the market was Apple, whose shares fell 5% after its third quarter earnings – despite being a record and 29% up on last year – were around a billion dollars short of expectations. Unsurprisingly, boss Tim Cook blamed supply chain issues and the continuing shortage of semiconductor chips. 

The fall in Apple’s share price was good news for fans of Microsoft, which duly reclaimed the title of ‘world’s most valuable company.’ 

…And Wall Street was much more Microsoft, Tesla and Google than Apple, as US stock markets more than made up the ground lost in September. The Dow Jones index climbed 6% to close October at 35,820, while the more broadly-based S&P 500 index was up 7% to 4,605. 

Far East 

Let’s start off where we ended last month – with the problems at Chinese property giant Evergrande. As you may remember, the company has hundreds of billions of dollars of debt and reportedly owes money to 171 domestic banks and 121 other financial firms. September ended with the company missing a £35m interest payment to foreign bondholders – the second missed payment in a week – and throughout the month, the company’s share price lurched up and down, depending on whether a payment had been made or missed. 

By the end of the month, the company chairman was apparently putting his own house up as collateral and – as we reported in October – bankers UBS estimate there are ten property developers in China with combined debt nearly three times the size of Evergrande. 

To property add panic. We have reported elsewhere in this Bulletin on rising prices for both raw materials and energy. Nowhere was that more keenly felt than in China. 

By the middle of the month, the price of coal had reached a record high, increasing by 10% in one day as flooding hit one of the country’s key mining areas. The impressively-named National Development and Reform Commission said that in view of the shortages the price of electricity generated by coal would be allowed to rise and fall by 20% (compared to a previous upside limit of 10% and a lower limit of 15%). 

Quite what that does for planning and cash flow in Chinese industry is anybody’s guess, and it was no surprise to see another surge in factory-gate prices. In September, they grew at their fastest rate for 26 years, adding to worries about both local and global inflation. 

Unsurprisingly, Goldman Sachs – which a month ago said that China would have zero growth in the third quarter – cut its growth forecast for the year from an already low 5.8% to just 5.4%. 

Goldman Sachs was wrong – but not by much. Official figures confirmed that the economy grew by 0.2% in the third quarter compared to the previous three months. Year-on-year, it was up by 4.9% compared to the third quarter in 2020, against a generally expected figure of 5%. Perhaps more worryingly, industrial output in the third quarter was up by just 3.1% against a forecast of 3.8%. 

There were no such worries for HSBC, which smashed expectations for profits in the third quarter, boosted by the release of reserves that had been set aside to cope with expected pandemic-related defaults. Analysts had forecast profits to come in at $3.78bn (£2.76bn): HSBC sailed past that, posting pre-tax profits for the three months of $5.4bn (£3.94bn). 

The region’s stock markets, however, largely took their cue from worries about inflation and energy prices, with the exception of Hong Kong’s Hang Seng index, which rose 3% to 25,377. China’s Shanghai Composite index fell 1% to 3,547, while the Japanese stock market was down 2% at 28,893. South Korea was the worst performer, with the market there down 3% in the month to 2,971. 

Emerging Markets 

We have mentioned power shortages already and they will almost certainly be mentioned again in the coming months. The Emerging Markets section of the Bulletin is no exception – but let us start with a story that sounds like something a James Bond villain would envy. 

El Salvador, as regular readers know, became the first country in the world to accept Bitcoin as legal tender. The country’s President took to Twitter in October to announce that the country had begun ‘mining’ Bitcoin using power harnessed from a volcano. President Nayeb Bukele said: “We are still testing and installing, but this is officially the first Bitcoin mining from a volcano.” He confirmed that the project had started by generating 0.00599179 of a Bitcoin, worth approximately £208. So there may be some way to go…

Rather more seriously, India is on the brink of an unprecedented power crisis, with more than half the country’s 135 coal-fired plants ‘running on fumes’ as coal stocks run critically low. 70% of India’s electricity is generated using coal, with the shortage threatening to derail the country’s economic recovery from the pandemic. 

Like many countries, demand for power has picked up sharply in India as the country has come out of the pandemic, with consumption in the last two months up 17% on the same period in 2019. India is the world’s second largest importer of coal, so will be badly hit by global price increases. 

For now this wasn’t reflected on the Indian stock market, which had a relatively quiet month, closing October unchanged in percentage terms at 59,307. The Russian market gained 1% to end at 4,150 but it was a poor month in Brazil, where the stock market fell 7% to finish at 103,501. 

And finally…

The ‘And finally…’ section of the Bulletin has brought you many heroes over the years and this month we must induct another into our Hall of Fame. Step forward Danish artist Jens Haaning, who was given $84,000 (£61,000) by the Kunsten Museum of Modern Art in Aalborg to create a work of art for a forthcoming exhibition. 

After receiving the money, Haaning e-mailed the exhibition’s curator saying that he had changed his mind. He duly delivered a blank canvas to the Museum, which he had titled ‘Take the Money and Run.’ He then kept the money. Many of our readers might see it as a suitable comment on modern art…

Doing rather less well in the monetary stakes was California man Mauro Restrepo. Mr Restrepo’s marriage was in trouble, apparently due to a curse placed on it by a witch hired by his ex-girlfriend. Seeking a solution, Mr Restrepo Googled ‘psychics’ and contacted Sophia Adams, a ‘psychic love coach’. Suitably convinced, Mr Restrepo handed over $5,100 (£3,700) to save his marriage. You won’t be surprised to hear that the matter is now with the lawyers…

Finally this month, we make the short trip to Ireland, where new rules to combat the spread of Covid have come into force. These now mandate the wearing of masks in nightclubs, but not when you are drinking or dancing. We can’t help but wonder exactly what else people are meant to be doing in a nightclub, if it’s not drinking or dancing!

Perhaps Mr Restrepo should have taken his wife to one. It would certainly have been cheaper than finding a psychic love coach on Google…

How long until we’re paying with Britcoin?

Wednesday, October 13th, 2021

In the first week of September, El Salvador, a Central American country with a population of just under 7m and ranked 101st in the world according to GDP, created history. It became the first country to accept the cryptocurrency Bitcoin as legal tender. 

Millions of people downloaded the government’s new digital wallet which gave away $30 (£22) in Bitcoin to every citizen. Businesses became obliged to accept Bitcoin as payment. 

It now looks likely that Ukraine will follow suit, with President Volodymyr Zelensky aiming to create a ‘dual-currency’ country by the start of 2023. Zelensky is a vocal Bitcoin supporter, and intends to initially introduce Bitcoin alongside the current currency, the hryvnia, with the intention that it will eventually become the dominant means of exchange. “The people of the Ukraine are prepared for it and they expect it,” he said. 

Ukraine ranks 56th in the world by GDP: with the greatest respect, neither it nor El Salvador are major economic powers. But it now seems inevitable that other, larger economies will follow their lead and introduce a digital currency. This might be Bitcoin – but it seems increasingly likely that a digital version of their current currency will be used. 

China has already tested its digital yuan currency. Earlier this year 181,000 consumers in Suzhou City (near Shanghai) were given the yuan equivalent of £6 to spend at participating outlets in a local shopping festival. Like other consumers who have taken part in Chinese trials, all they had to do was download the Bank of China app. 

…At which point those of you with privacy concerns might start to be worried. “Does this mean the Government could track whatever I spend?” Yes – and for Governments that is one of the huge advantages of a digital currency. Imagine if digital transactions became the norm – all fully trackable and traceable. As cash is used less and less often, and is perhaps even actively discouraged, the unknown economy withers and dies. Rishi Sunak can only dream of what that might be worth to him in tax receipts.

So are we on the way to ‘Britcoin?’ Will we see a digital pound? The Chancellor has already asked the Bank of England to look at the case for a central bank-backed digital currency, allowing businesses and consumers to hold accounts directly with the bank (meaning an account would not be with say, Barclays or HSBC, but with the Bank of England). 

Such a move seems inevitable in the long run. Back in El Salvador they are “excited and worried” in equal measure by the move to Bitcoin, with many people wondering just how stable savings and/or earnings would be in such a notoriously volatile currency. 

Presumably central bank-backed digital currencies like ‘Britcoin’ and the digital yuan would alleviate such worries, but you do wonder how long it would take for another, ‘unofficial’ currency to become established. There will always be people who would rather their transactions weren’t tracked by the authorities.