What’s Your View on Working from Home?

In the last few months, working from home has become a topic that’s up there with speed cameras and parking tickets. Everyone has an opinion on it and it’s guaranteed to start a passionate debate whenever it’s mentioned.

Many employers and employees alike will argue that remote and hybrid working has countless benefits, such as a better work-life balance for staff, reduced costs for businesses, and productivity being as high as ever, if not better.

But this shift in working methods, which has been widely embraced by businesses in countless industries, has drawn strong criticism too.

Brexit Opportunities Minister Jacob Rees-Mogg, for example, made his displeasure known by leaving notes on empty civil service desks saying: “Sorry you were out when I visited. I look forward to seeing you in the office very soon”.

Businessman Lord Sugar has also entered into this debate, describing homeworking as a “total joke”, adding: “There is no way people work as hard or productive as when they had to turn up at a work location.”

Lord Sugar’s comments came after PricewaterhouseCoopers (PwC) told workers it could take Friday afternoons off throughout the summer, as long as they get their work done by lunchtime.

Richard Osborne, a senior manager at PwC, described the Apprentice star’s comments as “at best childish and misunderstood”.

Writing on LinkedIn, he said Lord Sugar was “out of touch” with the “modern working world”, insisting: “This isn’t about taking time off to be lazy. It is about flexibility to work effectively as and when we work our best.”

Jacob Rees-Mogg, meanwhile, was widely condemned for leaving notes on empty desks, with FDA General Secretary Dave Penman, for example, saying it was “condescending, crass and insulting”.

Strong words are being used on both sides of the debate, a measure of just how strongly people feel about this issue. But why has working from home inflamed passions to such an extent?

According to Julia Hobsbawm, author of book The Nowhere Office, the issue is now part of a wider “culture war”.

Speaking to BBC News, she said: “You’re really seeing a difference between hardliners of a particular generational disposition like Alan Sugar, who genuinely believe that if you’re not in the office you’re not working, and soft-liners like PwC and their chairman Kevin Ellis, who recognise that how you work productively is a lot more complicated than turning up to a fixed place.”

Some businesses are attempting to straddle this line diplomatically, perhaps by allowing homeworking but asking people to be in the office for at least two days a week.

Law firm Stephenson Harwood, meanwhile, recently hit the headlines for its approach – allowing staff the option of working from home permanently, but only if they take a 20 per cent pay cut.

Philip Richardson, head of employment law at Stephensons Solicitors, said the idea of cutting pay in exchange for remote working “is going to raise eyebrows”.

Speaking to Personnel Today, he stated: “Many employees feel just as productive, if not more so, than if they were commuting into the office every day.

“If their work and output is of a high quality, some will view the decision as harsh to penalise employees solely on the basis of where that work is done.”

He added that the risk of this approach is that employees don’t feel trusted and that may prompt some to find a job elsewhere.

Trust is ultimately at the heart of this continuing debate, and many staff who don’t feel trusted will be well aware that they can move to a company that has embraced remote working. That puts a degree of power in the hands of employees, as managers won’t want their best talent to leverage this option and move elsewhere.

One thing is for sure – people aren’t looking back after the change in working habits that was precipitated by the pandemic, and many businesses might have no choice but to respond accordingly.


Amazon Switches its Focus to Groceries

April began with a stark headline in the Mirror as the paper proclaimed it April Cruel Day. ‘Energy bills up,’ ran the accompanying text. ‘Council tax up. National Insurance up. Water bills up. Stamps up. Broadband Charges up.’

The threat of inflation and the accompanying cost of living crisis have been well documented, and unsurprisingly, millions of British shoppers have been deserting the traditional weekly shop at Tesco or Sainsbury’s in favour of the discounters, such as Aldi and Lidl.

But could the sector be heading for an even greater shake-up, with Amazon recently deciding to focus its attention on the UK grocery market?

According to the announcement, the e-commerce giant has said it wants to shut all its book stores, as well as its other bricks and mortar shops in the UK and the US. Instead, it wants to ‘focus fully’ on the rapidly growing groceries market – and also ‘zoom in’ on fashion.

This comes just months after Amazon released its intention to aggressively enter the UK supermarket sector with plans to open more than 260 cashless grocery stores in the next three years. The company is apparently planning 60 this year, with 100 in 2023 and a similar number in 2024.

Amazon is aiming to match other companies’ aggressive opening of convenience stores, with Tesco, Sainsbury’s and Co-op all exceeding 100 openings per year over the last few years. So far – and surprisingly for Amazon – it hasn’t all been plain sailing, with the company grudgingly admitting that openings are lagging behind the planned dates.

Why is Amazon doing this? Apart from identifying a rapidly growing sector, Amazon is interested in a customer’s ‘lifetime value’. According to one retail analyst, ‘the data shows that when Amazon gains a customer through their grocery channel – or an existing customer opts for grocery – those customers bring in, by far, the highest life-time value for the business’.

More simply, Amazon is very happy to sell you a book once or twice a month – but it would be even happier if you did your weekly shop there, and it has identified bricks-and-mortar supermarkets as the fastest way to bring you into the Amazon ‘ecosystem’.

Ultimately, of course, we can only buy so many groceries. If we buy cat food from Amazon, we won’t buy any from Sainsbury’s. Over the next few years, we are going to see some intense competition in the UK grocery market. In the short term, this will be good news for consumers, with competition driving down prices. But we could well see some high-profile casualties over time: there may be some high streets and retail parks with rather large holes in them.


Will Supply Chain Problems finish off the UK Car Manufacturing Industry?

In 1922, there were 183 motor companies in the UK: by 1929, following the slump years, there were still 58, with production dominated by Morris and Austin. In 1932, the UK overtook France to become Europe’s largest car producer – a position it held until 1955. In 1937, the UK produced 379,310 cars and over 100,000 commercial vehicles.

Production continued to grow, with the all-time high reached in 1972 when the UK built 1.92m cars. The record for this century was in 2016, with 1.72m cars. Since then, however, we have seen a sharp decline in numbers, with 2016’s figures halved to 860,000 last year. Last month brought the news that the UK had built 100,000 fewer cars than in the same period last year – meaning that we are almost certain to see another decline in overall numbers this year. 

Anyone who has watched a news bulletin will be able to list the reasons: first the pandemic, global supply chain problems and now rising energy costs. 

The main problem is the supply of semiconductor chips, which perform an increasing number of functions in cars, from airbags to emergency braking systems to the ever-more-common touchscreens. And as we move increasingly towards electronic vehicles we’re going to need even more chips. 

The problem is that the wait times for the chips are increasing, not decreasing, with the recent lockdowns in Shanghai – and the knock-on effects on the port there – having made the situation significantly worse. There have even been concerns expressed in the US that China is seeking to dominate and control the future supply chain for both electronic and autonomous vehicles. 

So where does that leave the UK car manufacturing industry? Aston Martin, Bentley, Rolls Royce and Jaguar all make cars in the UK – as do Nissan, who last year committed to a major expansion of their Sunderland plant, creating 1,600 new jobs. Overall, there are around 800,000 people employed in the UK car industry, so it remains vital to the country’s economy. 

The UK, though, is now a long way down the global league table, ranking 18th in 2021 – directly behind Slovakia and just ahead of Iran. Output in the top five countries – China, the US, Japan, India and South Korea – dwarfs that of the UK, meaning that the manufacturers of semiconductor chips have much bigger markets than the UK.

Given the demand for the high-end cars that the UK specialises in, we are not likely to see the industry disappear any time soon, but the longer the supply chain problems continue, the more vulnerable the UK’s car industry becomes. According to the Society of Motor Manufacturers and Traders, the industry has a turnover of nearly £80bn, adds £15.3bn of value to the UK economy and sees eight out of every ten cars produced exported. It’s an industry we cannot afford to lose. 

Wait times for semi-conductor chips increase due to China lockdown
Ukraine war drives supply chain crisis
UK car production down as energy costs rise
China EV manufacturers grapple with rising costs
China looking to control global EV supply chain?
League table

How Many Bank Rate Rises Will We See this Year?

In April, the UK’s inflation figures for March were released. Having been 6.2% in February, inflation had risen to 7%, the highest rate for 30 years. 

Across the Atlantic, the figures were even worse, as US inflation reached 8.5% – the highest since March 1981 – as the Ukraine war pushed up energy prices. In the US, it is almost certain that the Federal Reserve will increase interest rates by 0.5% this month, and a report from bankers JP Morgan suggested that rates here in the UK could rise a further four times this year. 

In his Spring Statement delivered on March 23rd, Chancellor Rishi Sunak said he expected inflation to average 7.4% this year, but at the time, no-one was really expecting the war in Ukraine to last into next year – as many military experts are now predicting. As many of our clients will have read, the war – along with the continuing problems in the global supply chain – will push up the price of fuel and food. 

Traditionally, the Bank of England has used interest rates to control inflation. At the moment, the bank base rate is 1%, and if JP Morgan’s prediction is accurate, we could well see base rates in the region of 1.75% to 2% by the end of the year, and some forecasters are even suggesting that inflation could rise above 10% in 2022.

Will a rate rise be enough to curb inflation? Higher interest rates will certainly mean higher mortgage rates and more interest to pay on credit cards and should start to curb inflation. 

However, the war in Ukraine – traditionally known as ‘the bread basket of Europe’ – presents a once-in-a-generation set of circumstances as Russian forces continue to blockade ports and prevent grain exports. 

The World Bank has spoken of a ‘human catastrophe’, forecasting a 37% jump in food prices this year. The BBC said that the war will cause ‘the biggest commodity price shock’ since the 1970s. 

So whether we see three, four or five rises in base rates may be immaterial as far as inflation is concerned. People will unquestionably have less money to spend, but they have to buy food – and, of course, the energy price cap is set to rise again in October, adding another twist to the inflationary spiral. 

For clients who are savers, rising interest rates should be good news – although you suspect that rates paid on savings accounts will remain historically low. Although the vast majority of world stock markets fell in April, the UK’s FTSE-100 index proved resilient, registering a small gain of 29 points. Again, a prolonged period of inflation will put pressure on company profits. 

Rapid rises in bank rate this year
Additional compliance following MPC meeting: Rates rise 0.25% to 1% – economy to shrink
ING view on rates

Will Russia Default on its Debt? And What Would That Mean?

In the middle of March, Russia was due to make an interest payment of $117m (£89m) on two bonds denominated in dollars. There was some dispute over the payment: Russia said it had made the payment, the investors holding the bonds said they hadn’t received the money. The papers generally reported that if Russia didn’t make the payment by April 30th, it would be in default.

That payment has now been made, but what does it all mean? What does a country have to do – or not do – for it to be in default? And what does it mean for the rest of us if Russia does default on its loans?

In its simplest form, if Russia (or any country) fails to make an interest payment within the laid-down timeframes – or, for example, it pays in roubles when dollars have been specified – then it would constitute a default. Russia is already locked out of international borrowing markets due to the West’s sanctions: a default would mean it could not regain access until all creditors were paid in full (assuming the sanctions had been lifted).

Other countries that have defaulted have seen aggressive creditors go after physical assets – when Argentina defaulted, one creditor tried to take a naval vessel as payment. Good luck knocking on the Kremlin door and telling Vladimir Putin you’ve come for one of his nuclear subs…

More seriously, the World Trade Organisation has already said that the conflict in Ukraine will reduce global growth this year, cutting its earlier forecast of 4.7% to just 2.5%. A wave of defaults would presumably make that situation even worse – and any possible defaults will have consequences that spill over from Russia.

Russia and Russian companies are generally held to owe about $150bn (£114bn) in foreign currency debt, with interest payments falling due on a regular basis. The payment we mention above is simply one of a regular series of interest payments.

We know, Putin is demanding payment for his oil and gas in roubles, in a bid to strengthen the currency – but bondholders will want their interest payments in dollars, which may well prove difficult for Russia. And any default by Russia itself – which becomes more likely as sanctions are ramped up – may well trigger defaults from Russian companies. Defaults would almost certainly drive the few remaining foreign investors out of the country.

But as we noted above, the potential problem goes wider than Russia. The debt is largely held by institutional investors such as hedge funds, companies, banks and pension funds. The problem for the investors is that the possible default has caught many of them by surprise. The last country to default was Argentina in 2020 – but that problem had been building for a long time. With Russian bonds currently trading on international markets at large discounts, many investors could be looking at large losses.

As this article was being written, the horrors in various regions of Ukraine continue to come to light. They will unquestionably lead to demands for more, and tougher, sanctions. But the tougher those sanctions are, the higher the risk of Russia defaulting on payments that become due – and that will have implications that go well beyond Russia.

BBC News
Al Jazeera

How the War in Ukraine Will Push up Prices

Following Russia’s invasion of Ukraine on February 24th, people have been asking the question, is the war is likely to push up prices in the UK, making the current cost of living crisis even worse? The short answer is ‘yes, almost certainly’. We have tried to explain below what is likely to happen and how prices at home might be impacted. 

As you will know, the war has sharply pushed up the price of energy and fuel, with the oil price seemingly rising and falling with the advance and retreat of Russian troops. The price of oil has reached its highest level in almost 14 years, while gas prices have more than doubled. 

The UK gets only 6% of its crude oil and 5% of its gas from Russia, with the EU sourcing nearly half its gas from the country. The problem – not just with oil and gas but with many commodities – is that countries may seek to stockpile, which will further drive up prices. 

The cost of your weekly shop could also rise. Russia and Ukraine were once dubbed ‘the breadbasket of Europe’, exporting almost a quarter of the world’s wheat, together with half of sunflower products, such as seeds and oil. While the UK typically produces 90% of the wheat consumed in the country, farmers may well find themselves paying more for fertiliser, which is one of Russia’s biggest exports. 

The continuing war may also push up the price of aluminium, which will mean an increase in the price of tinned goods. 

If prices continue to rise – and despite Rishi Sunak’s comments in his Spring Statement many economists see inflation pushing up towards 10% this year – then the Bank of England will almost certainly increase interest rates in a bid to keep a lid on inflation.

Inevitably, this will mean an increase in mortgage rates for people with mortgages linked directly to base rates – and rates generally are almost certain to go up. 

We’ve mentioned tinned goods – but the war may also mean those rather larger tins we drive around in will increase in price. Russia is a major exporter of metals, including nickel (used in lithium-ion batteries) and palladium, which is used in catalytic converters. Throw in continuing supply chains problems further disrupting the supply of semiconductor chips and an increase in the price of cars looks likely. 

These are worrying times. We have obviously seen sharp fluctuations in world stock markets with the progress of the war, but it is important to remember that saving and investing is a long term commitment.


Set Specific Financial Targets to Achieve Lifestyle Goals

If you’re creating a financial plan, with a view to achieving certain ambitions in life, you need to include details.

For instance, if you want to travel more in later life, you can’t simply say you’ll put money aside for holidays.

Or if you want to retire early, simply putting money into a pension isn’t enough.

In the first example, you need to consider how much income you’ll receive in later life and your likely outgoings, so you can estimate how much disposable income you’ll have to pay for trips abroad.

And in the second scenario, you again need to have a rough idea of your income, so you’re able to both meet basic living costs and enjoy the kind of lifestyle you want to have.

In short, a financial plan needs to include specific goals, based on real numbers that can be tracked and measured as each year passes. And this is where a financial adviser can make a big difference.

If you’re able to be specific about exactly what you want to achieve, a regulated, professional adviser can work with you to determine the route to your destination. They’ll look at everything from your pension and investments to what tax allowances you may be eligible for, and help you prepare a clear plan that outlines how you can achieve your objectives.

Ultimately, being specific puts you in control of your finances, and helps you plan ahead with a sense of purpose, direction and optimism.

Keep an Eye on Your Finances

Planning ahead with confidence relies on you having a good awareness of your current financial situation. You probably know how much you’re earning, but do you know how much you’re losing in tax, bills and other general living expenses?

That’s why it’s so important to track your income and outgoings, so you have a clear idea of how much money you have available to you.

This can help you highlight where money might be being wasted. Perhaps you’re paying for a streaming subscription service you don’t really use, you’re on a more expensive phone tariff than you actually need or paying over the odds to service a debt.

Or perhaps technology has changed your relationship with money to the point where you’re not really aware of what you’re spending overall. In this age of contactless payment and being able to buy items online in just one or two clicks, it’s so easy to spend large sums without actually thinking about how much you’ve got left in the pot, so it’s essential you look at what you’re spending and how.

Once you’ve worked out where you’re haemorrhaging money unnecessarily, you could perhaps use this cash more effectively, with your lifestyle goals firmly in mind.

Perhaps you could invest it in a revenue-generating asset, put it in a savings account or increase your pension payments. How you use the money you’ve freed up depends on your specific objectives, but if you know how much you have to work with, you’ll be in a better position to achieve it in the future – and a financial adviser can be with you every step of the way.

Getting to grips with every aspect of your finances and planning ahead can seem daunting, but a professional adviser can help you navigate this maze and make sense of the many different options available to you.


Leave a Gift to Charity to Reduce Your Inheritance Tax Bill

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 UK Closes in on the CPTPP

Last month, it was reported online that the UK was ‘closing in’ on CPTPP membership. The Department of Trade announced that we had moved into the ‘second and final phase’ of the application, and the UK could be a member ‘by the end of the year’.

Many of our clients will know that the CPTPP is a trade bloc. But who are the other members? And what would membership mean for the UK? 

CPTPP stands for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The 11 member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. 

The agreement evolved from the Trans-Pacific Partnership (TPP) which had been agreed in 2016, and which included the USA. Donald Trump withdrew the US from the agreement when he became President, and the CPTPP in its present form was officially signed in Santiago in March 2018. 

It is immediately apparent that all the countries involved have some link with the Pacific. Brunei may not be the largest economy in the world – it accounts for around 0.01% of global GDP – but it is demonstrably closer to the Pacific than the UK. 

Why then does the UK want to join? And what benefits would being a member bring? 

Simply put, the CPTPP is a huge trading bloc. The 11 member countries account for 13.4% of global GDP at approximately $13.5tn (£10.26tn) making it one of the world’s largest free trade areas. For comparison, China, which is not a member of the CPTPP, accounts for around 15.1% of global GDP. 

If the UK were to become a member of the bloc – and that now looks very likely – it means that the vast majority of our exports to the member countries would become tariff-free, giving a significant boost to British business. Anne-Marie Trevelyan, who has taken over from Liz Truss as Secretary of State for International Trade, said: “CPTPP is one of the largest and most exciting free-trading clubs in the world. Today’s announcement … means the finishing line is in sight.” 

Joining the CPTPP would have a number of advantages. It would mean lower tariffs on key exports such as cars and whisky, and should also benefit the UK’s farmers, with CPTPP members expected to account for 25% of the global demand for meat by the end of the decade. The CPTPP countries are also advanced in both the digital and services sector – which should play to the UK’s strength as the world’s second-largest services exporter. 

Two-thirds of the world’s middle classes are expected to be in Asia by the year 2030, by which time UK exports to the member countries are expected to have grown 65% to £37bn a year. This would be an unquestioned boost to jobs, which could well increase over time, with South Korea, Taiwan, the Philippines and Thailand all thought to be keen on joining. 

The Government will be working hard to make an announcement by the end of the year – by which time, of course, we are likely to be only 18 months off another General Election.

World rankings
UK closes on CPTPP membership
Government data,and%20work%20in%20member%20countries.

It’s Unfair! But how Unfair?

It is now a well-documented fact that the pandemic was good for billionaires. According to Oxfam’s annual report on global inequality – always released to coincide with the World Economic Forum in Davos – the pandemic saw a new billionaire created every day.

The world’s ten richest men more than doubled their collective wealth between March 2020 and November 2021, seeing their combined assets increase from $700bn (£533bn) to $1.5tn (£1.14tn).

In contrast, said Oxfam, ‘99% of the world’s population became worse off because of lockdowns, lower international trade, less international tourism – and, as a result, 160m people have been pushed into poverty’. 

Oxfam clearly has an agenda. Many might disagree. 

After all, Jeff Bezos left a well-paid job on Wall Street to start Amazon (or Cadabra, as it originally was, until someone misheard the name as ‘cadaver’). In the early days, the company operated out of the garage at Bezos’ house in Seattle, so there are many people who’ll say ‘good luck’ to him. After all, Amazon has allowed thousands and thousands of small businesses around the world to flourish, it has allowed authors to publish books, and it has paid spectacular dividends to anyone who invested in the company in its early years. 

There are two sides to every coin. One thing that does appear to be clear though, is that the richest 10% of the world’s population are responsible for a hugely disproportionate amount of the world’s carbon footprint. A recent study in the journal Nature Sustainability concluded that the world’s richest ten percent are responsible for an estimated 47% share of global CO2 emissions. 

On average, a person in the bottom 50% income group produces one ton of CO2 every year – compared to 48 tons for the richest one percent. 

If we look at another measure, just four countries – the USA, China, Japan and Germany – make up over half the world’s economic output, if we take GDP as a guide. 

If we focus solely on the UK, then – according to the Office for National Statistics – the wealth of the richest one per cent of households is more than 230 times that of the poorest ten per cent. The top one per cent – with average wealth of £3.6m – hold 43% of all the wealth in the UK. 

Your view on whether this is right or wrong will almost certainly depend on your political standpoint. What is clear is that however much government’s might talk about ‘levelling up’ or ‘re-distributing wealth’ other factors, such as individual enterprise and initiative, or national and global events, play a far bigger part in shaping the distribution of wealth. 

Oxfam report’s%2010%20richest%20men%20doubled%20in%20pandemic%2C%20Oxfam%20says,-17%20January&text=The%20pandemic%20has%20made%20the,each%20day%2C%20its%20report%20claims.
Inequality and unfairness: the richest 10% = 47% of CO2 emissions
Rising inequality
Four countries make up half the world economy