2017 has been an interesting year in terms of both politics and economics. Following the Autumn Statement (for a summary, please read our recent blog), there could be some changes that may affect you in the next financial year. This includes changes to stamp duty and fuel duties, and a slight increase in tax rates and the VAT threshold.
From Brexit to Trump, we take a look at what’s been going on this year and what might be in store for 2018:
• Brexit and trade negotiations with the European Union
Brexit is still a big talking point, and this is set to continue long into next year, as negotiations continue on the UK’s departure from the European Union. New trade deals are being sought from international partners, and discussions continue on how we can avoid costly tariffs and duties as a result of leaving the European Single Market and Customs Union. It is estimated that 50% of imports to the UK are from the EU and 45% of UK exports go to the EU, which hopefully gives the UK some bargaining power.
The government are seeking clear customs agreements to avoid companies having to pay costly tariffs and duties, which could result in an increase in the cost of goods and services. The government is also trying to avoid a ‘hard border’ between Northern Ireland and the Republic of Ireland, which would cause great turmoil across this region.
Our advice – if you’re running an import/export business that trades with the EU, watch the negotiations carefully and make sure you have a sound financial buffer in place for your business. If you need financial advice, please speak to one of our financial planners.
• UK Growth, GDP and Interest Rates
In November, the Bank of England raised the base interest rate by 0.25% – this was the first rise in over a decade, and two further rises are expected in the next three years. If the rate of inflation stays high above the 2% target, this may happen sooner rather than later. The consumer prices index (CPI) rate of inflation rose to 3.1% – the highest level for five years.
Our advice – now is a good time to check any cash savers accounts, as you should have received higher interest on your savings. However, some providers haven’t yet passed on the recent interest rate rise to customers, so talk to one of our team if you are unsure.
Overall, we have seen a slower rate of growth in 2017 at around 1.5%, and some economists are predicting this to decrease to 1.4% in 2018. Slow economic growth is very much on the political agenda, and the government are seeking better ways to increase productivity as this is directly linked to GDP (for more information on this relationship, read our recent blog on Productivity and Investments). To boost productivity growth in the UK will rely on increased investment (both private and public) in housing, transport, technology, skills and innovation. The government has pledged to spend £2.3bn on R&D (research and development) funding to stimulate growth, as well as a national retraining scheme to encourage more employment in certain industry areas (construction, engineering, technology and science).
Our advice – if you run a business in one of the above areas, check out possible funding opportunities and schemes that may benefit your company and employees.
• Trump and Global Markets
This year saw Trump mania reach fever pitch. If we forget the hype and scandals for a moment, how has the Trump administration affected the US economy? Currently, the economic outlook for the US is healthy, with a strong stock market. US GDP is between the ideal range of 2 – 3% and there is little inflation or deflation. President Trump had promised economic growth to hit 4%, although many economists suggest this would not be a healthy aim as it may cause a ‘boom and bust’ situation. However, it has been predicted that US GDP growth will continue at around 2.5% in 2018, and is then expected to fall in 2019 and 2020 as a result of Trump’s policies (including the controversial “America First” Energy Plan).
In other news, President Trump continues to rock relations with other major global powers, such as Russia and China. The US has a complex relationship with China, as both countries have economies that are intrinsically interlinked. Trump is also trying to juggle public relations with China to tackle the looming threat of North Korea after missiles were fired across Japan. A political threat such as this can have consequences on neighbouring economies – for example, back in August, Japan’s Nikkei Index fell to a 4-month low after the missile launch by North Korean leader, Kim Yong Un. Although more recently the Nikkei managed to shrug off the more recent missile launch until this threat dissipates one can expect continued market volatility.
Our advice – if you have invested in foreign stocks and are worried about how you might be affected by political wranglings overseas, then please get in touch with one of our team. We always advise our clients to hold a diverse mix of investments within their portfolio to reduce the level of risk.
If you have any concerns on recent economic issues and the impact they may have on your savings and investments, then please get in touch. We’re always happy to advise you on any questions you may have.