Category: Economics


is the Bitcoin bubble close to bursting?

You may have seen Curtis “50 Cent” Jackson make the news at the end of January after becoming a Bitcoin millionaire. The rapper, actor and businessman made his 2014 album, Animal Ambition, available for purchase for a fraction of a Bitcoin upon release, making around 700 Bitcoin from sales. 50 Cent has admitted that he had forgotten about the earnings, which have sat untouched since 2014 and are now reportedly worth somewhere between £5 million and £6 million thanks to the meteoric rise of the cryptocurrency’s value in recent months.

Despite 50 Cent’s good fortune, those in the financial sector continue to warn against Bitcoin and other cryptocurrencies as a sound investment. Alex Weber, chairman of global financial services company, UBS, is one of the latest figures to lend his voice to these warnings, describing cryptocurrencies as ‘not an investment we would advise.’

There have also been warnings from consultancy firms that initial coin offerings (ICOs), which raise funds by providing cryptocurrency tokens, are prime targets for cybercriminals. Ernst & Young analysed 372 ICOs which had raised $3.7 billion in total and found that hackers were taking as much as $1.5 million in proceeds from these each month with approximately $400 million stolen in total.

The announcements from governments worldwide that cryptocurrencies will soon be regulated has resulted in huge price fluctuations, with Bitcoin dropping from its high point of almost $20,000 in December 2017 to around half that towards the end of January 2018. The steep drop is due in part to the announcement by the government of South Korea, the third largest cryptocurrency market in the world, that its planned ban on the use of anonymous bank accounts in cryptocurrency trading would be implemented from 30th January.

Another concern surrounding cryptocurrency technology is the continued hype surrounding it, with companies taking advantage of investor buzz. The US Securities and Exchange Commission has warned that companies will be scrutinised over name and business model changes which have been made to capitalise on the hype.

Due to these developments in recent months, many economists are now predicting the cryptocurrency bubble could be about to burst. When, or if, this will happen remains to be seen, but the risks surrounding these relatively new forms of investment continue to be a worrying reality.

Theresa May calls surprise early election

During a surprise announcement outside Downing Street on the morning of 18th April, Theresa May set the date of the next UK general election as the 8th June 2017, almost three full years before the previously expected date of May 2020.

Delivering the statement revealing the move, Mrs May said that the early general election would further deliver the ‘certainty, stability and strong leadership’, which she said the Conservative party had offered since the referendum on Britain’s EU membership. The Prime Minister elaborated to say that, ‘the country was coming together, but Westminster was not’, a reference to the fact that, despite the referendum result, the Conservatives still face opposition within Parliament on what so-called ‘Brexit’ should look like, or even whether it should still take place at all.

The Prime Minister addressed this point directly, saying that she was ‘not prepared’ to let those who oppose Brexit ‘endanger the security of millions of working people across the country. What they are doing jeopardises the work we must do to prepare for Brexit at home.’ Mrs May went on to say that, ‘we need a general election and we need one now, because we have at this moment a one-off chance to get this [a general election] done whilst the European Union agrees its negotiating position.’

Addressing the fact that she had previously said the next general election would not be before the May 2020 date, Mrs May said that she had ‘only recently and reluctantly come to this conclusion.’ The Prime Minister said that she now felt that a general election was ‘the only way to guarantee certainty and stability for the years ahead… and to seek your support for the decisions I must take.’

Speaking directly to her political rivals, the Prime Minister said that she had a simple challenge to them: ‘this is your moment to show you mean it… let the people decide.’

Analysts were quick to point out that the election gives Mrs May the chance to increase her party’s majority in the House of Commons. The Conservative’s majority has been slim for some time now, which is causing Mrs May a level of discomfort when it comes to shaping Brexit. Though the general election does give her party the chance to make gains – against opposition which currently trails in the opinion polls – it also gives Labour and the Liberal Democrats the chance to shape their own arguments around Brexit. Many of the seats held by Labour, in particular, are still considered ‘safe’ seats which may limit the gains available to the Conservatives, though whether anything is truly ‘safe’ in political terms any more is a matter for some debate!

In the run up to the announcement, the pound fell against the dollar which helped the FTSE 100 to rise from losses made earlier in the day. After the announcement, however, the FTSE fell again, whilst the pound recovered, showing that not only is a week a long time in politics, but a fifteen minute announcement is a long time for the markets!

We will be sure to keep you fully informed of all of the details in the run up to the election and how the outcomes could impact you and your financial planning, both now and into the future.


Autumn Statement Preview 2014

Last year, George Osborne took to the micro-blogging site Twitter to announce his Autumn Statement. Sadly, there was no mention of this year’s speech on the Chancellor’s social media account, but we do know it will be on Wednesday December 3rd and if he follows last year, Mr Osborne will be on his feet around noon.

Before we look at what we can expect in the Autumn Statement, let’s first look at some of the background to it: the picture is rather murkier – and perhaps less optimistic – than it was last year.

First of all there is a General Election just around the corner: the next Election will be held on May 7th 2015. Traditionally, that would mean a Chancellor of the Exchequer gearing up for a raft of tax giveaways in the Autumn Statement and in the March Budget. We doubt that will be the case this time.

The central theme running through George Osborne’s period as Chancellor has been deficit reduction – and it’s unlikely that he’ll give up on that now. Generally speaking, Osborne’s time as Chancellor has been viewed favourably in the financial markets: the recent IMF report which was critical of many countries and spoke of an ‘uneven’ recovery in global markets, was full of praise for the UK. Osborne is unlikely to throw that reputation away.

Besides, his hands are tied. As he said when speaking to the BBC after the IMF published its report, “The UK is not immune to what is happening on the continent”. What is happening is a serious slowdown, with even the German economy recently reporting a fall in output.

UK growth is generally expected to be 3.1% this year. However, a recent report from the Ernst & Young Item Club has forecast a fall to 2.4% next year. The Chancellor has also found himself faced with falling tax revenues: most of the new jobs that are being created are low paid jobs, and more people are becoming self-employed.

Throw in the political uncertainty from the Scottish referendum result and the rise of UKIP and George Osborne’s room for manoeuvre is limited. He appears to have already told his Cabinet colleagues that there is no money for extravagant giveaways, and the rest of us can expect to receive the same message on December 3rd.

So what can we expect? After all, this is the Chancellor who gave us “the most radical reforms to pensions for a hundred years” and totally re-wrote the rules on Individual Savings Accounts. Despite the limits he has to work with, we can still expect George Osborne to pull at least one rabbit out of the hat.

It might well be another re-writing of the ISA rules – or a new type of ISA – designed to encourage peer-to-peer lending. Start-ups and small businesses are still struggling to find capital from conventional sources. Not surprisingly, there are now an increasing number of sites appearing on the web allowing businesses to ‘crowdfund’ – to raise money from the general public. There are suggestions that the Chancellor may officially recognise this trend and the help it is giving to emerging businesses and take steps to encourage this lending by the general public.

For more established businesses, there are strong suggestions – not least from Business Secretary Vince Cable – that there will be steps taken to hand small businesses rate relief. They should expect something “positive in the pipeline in the Autumn Statement” according to Mr. Cable. This may well be linked with moves to encourage investment in UK high streets, which continue to struggle.

After the pensions changes were announced in the March Budget, Pensions Minister, Steve Webb, glibly announced that the Government, “wouldn’t be bothered” if people used their pension pots to buy a Lamborghini. George Osborne seems inclined to trust the good sense of the British people, but don’t be surprised if there is further tinkering with the pensions rules. Now the dust has settled, there are suggestions that the new rules have created some loopholes which the Chancellor may be keen to close.

He’ll also continue with his wider crackdown on tax evasion, although as the Daily Telegraph recently commented, digital companies operating in several countries are increasingly needing “international, not local” taxation systems.
Finally, expect the Chancellor to take further steps to address the skills shortage in British industry. In a recent study by the accountants Grant Thornton, 40% of UK businesses identified skills shortages as their biggest problem, with a significant number saying that a reduction in national insurance contributions would make them more likely to take on apprentices. A move in this direction would come as no surprise.

Whatever other surprises the Chancellor comes up with on December 3rd will be covered in our Autumn Statement Bulletin. As last year, we’ll be preparing this as the Chancellor is speaking and we’ll be working into the evening – so we’d expect the Bulletin to be available to our clients the following day


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Inflation Rates: What’s Pushing our Prices Up or Down?

The ONS (Office of National Statistics) revealed recently that the UK inflation rate had dropped to 2% in December 2013, but what actually contributes to influencing our inflation rate, moving the prices of the goods we use up or down?

Over the last five years, the three main contributors to the 12-month inflation rate were food & non-alcoholic beverages, housing, water, electricity, gas & other fuels, and transport (including motor fuels). Combined, these three sectors have, on average, accounted for over half of the 12 month inflation rate each month.

The largest downward contributions to the change in the CPI 12-month rate between November and December 2013 came from food & non-alcoholic beverages. Prices overall rose between November and December 2013 as they do between these months in most years. The rate of the rise was smaller than between the same two months in 2012 and was the smallest it has been since 2006. The downward contribution came from price movements for most foodstuffs and non-alcoholic beverages, with the largest contributions coming from price movements for fruit and meat.

These downward contributions were partially offset by an upward contribution from prices for bread and cereals where the rate of price increases has accelerated. Looking over the longer term, inflation for food and non-alcoholic beverages has grown at a faster rate than overall inflation in each of the last eight years.

Overall, the cost of recreation and culture fell at a quicker rate between November and December 2013 than between the same two months in 2012. The downward contribution came from across the sector, with the largest contribution coming from prices for games, toys and hobbies – notably computer games, where there were reports of sales and lower priced games on older platforms.

The largest (though relatively small compared to many months) upward contribution to the change in the CPI 12 month rate between November and December 2013, came from transport, where prices overall rose at a quicker rate between November and December 2013 than between the same two months in 2012.

The majority of the upward contribution came from prices for petrol and diesel. Petrol prices rose by 0.5 pence per litre between November and December 2013 compared with a fall of 2.8 pence per litre between the same two months in 2012, to stand at 130.4 pence. Diesel prices rose by 0.8 pence per litre between November and December 2013 compared with a fall of 1.4 pence per litre between the same two months in 2013, to stand at 138.3 pence. The upward contribution was partially offset by air fares where prices increased between November and December 2013 as usual, but at a slower rate than in 2012.


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Number crunching by Her Majesty’s Revenue and Customs (HMRC) provides for us overall figures for 2010/2011 key out-turns for taxpayers and income tax liabilities. In terms of an analysis of the body of taxpayers, we are told that:

  • there were 31.3 million individual income taxpayers in 2010/2011, an increase of 0.7 million compared with the previous year.
  • there were 28 million non-higher rate taxpayers (89.6% of all taxpayers), 3.02 million higher rate taxpayers (9.6%), and 236,000 additional rate taxpayers (0.8%).

The average rates of taxation applied to taxpayers in 2010/2011 were 12.5% for basic rate taxpayers, 23.1% for higher rate taxpayers, and 39.9% for additional rate taxpayers.

The share by band of total income and tax liabilities were:

  • the richest 50% of taxpayers by total income accounted for a 76.5% share of total income and 88.7% of tax liabilities.
  • the richest 1% of taxpayers by total income accounted for a 11.5% share of total income and 25.0% of tax liabilities.

In terms of tax liabilities due on taxable incomes, 61.3% fell within the basic rate tax band, 23.9% in the higher rate band, and 14.7% in the additional rate band.

The HMRC projections for 2013/2014 estimate that there are:

  • 29.3 million taxpayers in 2013/2014, which is 2 million lower than in 2010/2011.
  • 4.3 million higher rate taxpayers in 2013/2014, which is 1.3 million higher than in 2010/2011, with 290,000 additional rate taxpayers in 2013/2014.

Also in 2013/2014 average rates of tax fall to 10.6% for basic rate taxpayers, 22% for higher rate taxpayers, and 38.8% for additional rate taxpayers. HMRC notes that recent out-turns and projections for the highest income taxpayers are strongly affected by expected responses to changes in the top rate of income tax.



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Handy Guide for the Tax Rates 2013/2014

A useful guide to keep all the tax rates handy.  Click the link below – print off double sided fold and keep….


Concept Financial Planning Tax Table Guide


Should you wish us to send you a copy, just contact us with your details and we will send out free of charge.


Small Print – The guide is for information only. The rates and allowances are subject to our understanding of legislation as at April 2013 and are subject to change.


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Guide to the GDP

The GDP, ‘Gross Domestic Product’, is arguably the most important of all national economic statistics. The GDP seeks, every three months, to capture the state of the economy in one percentage number.

If the GDP figure is up on the previous three months, the economy is growing. If it is down, the economy is contracting and if the contraction is over two consecutive months, the economy is in recession! In the UK, the Office of National Statistics (ONS) gathers and publishes the GDP data.

GDP is the principal means of determining the health of the UK economy and is used by the Bank of England as one of the key indicators in setting interest rates. If GDP growth is slow, higher interest rates could damage any recovery. However if prices are rising too fast, we could expect the Bank to increase interest rates to try to control them.

The Treasury also uses GDP when planning economic policy. When an economy is contracting, tax receipts tend to fall and the government adjusts its tax and spending plans accordingly. UK GDP is used internationally by the various financial bodies such as OECD, IMF, and the World Bank to compare the performance of different economies. The EU also uses GDP estimates as a basis for determining different countries’ contributions to the EU budget.

The Office for National Statistics publishes one single GDP quarterly figure, using three ways of measuring growth. Each measure should produce the same GDP percentage number.

  • Output measure: This is the value of the goods and services produced by all sectors of the economy; agriculture, manufacturing, energy, construction, the service sector and government. Considered the most accurate in the short term, this involves surveying tens of thousands of UK firms.
  • Expenditure measure: This is the value of the goods and services purchased by households and by government, investment in machinery and buildings, and including the value of exports minus imports. For this measure, the ONS surveys manufacturing and service industries.
  • Income measure: The value of the income generated mostly in terms of profits and wages. Information on sales is collected from 6,000 companies in manufacturing, 25,000 service sector firms, 5,000 retailers and 10,000 companies in the construction sector.

Data is also collected from government departments covering activities such as energy, agriculture, health and education. The ONS produces the earliest estimate of GDP of the major economies around 25 days after the end of a three month period, providing an early estimate of the real growth in economic activity. It is quick, but only based on the output measure, when around only 40% of the data is available, so this figure is revised as more information comes in over the next two months.

We may be forgiven for wondering about the statistical reliability of this flagship growth marker when we consider that the percentage growth, after all the number crunching, is often only 1% or less.

In addition, the quarterly published GDP growth figure can still be subject to later revision to take account of subsequent analyses, for example of price and inflation figures. However the final quarterly GDP figure is what everyone seems to anticipate and wait for.

Are we coming out of a double-dip recession or heading for a triple-dip, is it a ‘blip’ or are ‘green shoots emerging’ – whatever the three monthly GDP growth figure is, we can be sure that there will be a lot of talk about it!



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Chancellor’s Autumn Statement 2011

Chancellor George Osborne delivered his Autumn Statement at lunchtime on Tuesday, November 29th against a backdrop of gloomy economic forecasts.

The previous day, the Organisation for Economic Co-operation and Development (OECD) had predicted that the UK would slip back into “a modest recession” early in 2012, with unemployment reaching 9%. The OECD blamed this on a weak demand for exports, the Government’s austerity measures and the squeeze on consumer spending.

Reporting on Tuesday morning, the Office of Budgetary Responsibility (OBR) was slightly more optimistic, forecasting growth of 0.7% for 2012 and 2.1% in 2013. However their forecast of growth reaching 3% from 2015 was looked on sceptically by most commentators.
The Chancellor began his statement by emphasising that Britain “would live within its means” – but he still promised a significant investment in education and infrastructure projects, so that the country “could pay its way in the future.”


Government borrowing is currently predicted to hit £127bn in 2011/2012.

However, the problems in Europe mean that total Government borrowing over the next four years is now forecast to be higher than originally anticipated with an extra £112bn being needed.

It was inevitable that figures like this would mean that savings (or ‘cuts,’ depending on your political standpoint) would have to be made, and the axe quickly fell on the public sector. The Statement contained a serious amount of pain for public sector workers: pay rises will be capped at 1% for two years(after the end of the current freeze in Spring 2012), and the OBR is now forecasting 710,000 public sector job losses by the first quarter of 2017. With many public sector workers due to strike today (November 30th) presumably the Chancellor thought he might as well get all the bad news out of the way.

George Osborne also announced that the pension age will rise from 66 to 67 from 2026, which is eight years earlier than previously planned. This move will save a further £59bn. Short-term, the value of the state pension will increase by £5.30 per week from April 2012.

One of the key themes of the Autumn Statement was investment in infrastructure – as Deloitte’s head of infrastructure, Nick Prior, commented on Twitter, economic growth only comes when “shovels get in the ground.”

In a new initiative, some of the money for the infrastructure investment will now come from UK pension funds, following a model which has worked well in Canada and Australia. Joanne Segard, Chief Executive of The National Association of Pension Funds (NAPF), described the investment as “a real winwin.” Currently UK pension funds hold over £1 trillion in assets, but only 2% of that is invested in infrastructure. However, the Government is going to need to offer the pension funds long-term investments with an income that exceeds inflation. So potentially good news if you’re invested in a pension – possibly not so good if you suddenly find that you’re on a brand new toll road.

There is also a distinct possibility that we’ll see the sovereign wealth funds of other countries investing in UK infrastructure projects. Before the Chancellor’s speech the FT had already carried a piece by the Chairman of the China Investment Corporation, expressing his desire to “team up with fund managers or participate in public-private partnerships in the UK infrastructure sector.”

As well as the above, other key points in the Autumn Statement were: • The Bank Levy will rise to 0.088% from January 1st. The Government is aiming to collect £2.5bn a year from the Levy

• A credit easing programme is to be introduced to underwrite up to £40bn in low-interest loans to small and medium sized businesses. The business rate tax relief holiday will also be extended to 2013

• The Government will consult on allowing small firms to make staff redundant without them being able to claim unfair dismissal

• The rail fare increases will be less than originally planned

• The 3p fuel duty increase planned for January will be cancelled – so some good news for the hard-pressed motorist
• An extra £1.2bn will be spent on education, with free nursery places being extended
• And British science is to receive an additional £200m of extra funding to support research. (But to put this in perspective, it’s 0.2% of the value which was placed on Facebook the same day.)

Reaction to the Autumn Statement was predictably mixed. The Times said that Osborne was ‘inflicting pain to fight off [a] debt storm,’ while the Guardian concentrated on the job losses in the public sector. Many commentators criticised the Chancellor for ‘tinkering’ when bolder action was needed.

Reaction to the speech on the stock market could hardly be described as euphoric, but the FTSE did manage a small gain after the Chancellor’s speech. But as if to emphasise that Britain remains vulnerable to the world economy in general and the European debt crisis in particular, Italian bond yields reached new highs while Osborne was speaking and credit ratings agency Fitch downgraded its forecasts for the US economy. By Monday night Fitch was also warning that it is getting harder for Britain to maintain its AAA credit rating – which helps the Government to borrow at lower rates of interest. “May you live in interesting times,” as the Chinese saying goes. Whatever the contents of his Autumn Statement, George Osborne and the British economywill certainly be doing that

Moving from RPI to CPI

In June 2010, the coalition government announced that, in future, state and public service pensions would increase in line with the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change aims to help the government cut the UK’s sizeable budget deficit.

CPI does not include housing-related costs such as mortgage interest payments, buildings insurance and council tax. The rate of CPI has therefore tended to run below that of RPI in recent years and the government contends that CPI is a more appropriate measure of inflation because it strips out these costs (which are considered less relevant to pensioners who, arguably, will have repaid any mortgage by the time they retire). To ensure consistency, the government subsequently applied this ruling to occupational pensions. However, this triggered a complex debate over whether private pension schemes would be able to move to CPI. According to a survey by the National Association of Pension Funds (NAPF) published in December 2010, many such schemes have RPI indexation specifically written into their scheme rules.

The NAPF warned against any ensuing uncertainty, suggesting pension funds might find it difficult to plan ahead. In the same survey, they stated a belief that switching to CPI could increase flexibility for pension funds, but suggested the implications for current and future pensioners needed to be carefully considered to ensure the full facts were understood. Movement among pension funds was swift, however, and KPMG’s 2011 Pensions Accounting Survey showing that many companies have already benefited from making the switch.

Travel Money – What to Expect

Between the beginning and end of July, the value of the pound seemed to fluctuate almost daily. Anyone going on holiday and wanting to make the best of the tourist exchange rate may have experienced great difficulty deciding when to change sterling in order to get the best deal.

Information from leading tourist exchange businesses indicates that tracking the ups and downs seems to change daily. Over a three week period in July, the sterling exchange rate recovered but the outlook was bleak. It rose, stopped, declined, rose and slumped again, just as the euro rallied!

A weaker pound means less favourable tourist exchange rates. It’s very difficult to know when to purchase foreign holiday money in volatile monetary times in the eurozone and globally. Tourist exchange rates are always changing but overall the current economic climate has seen tourist currency exchange rates to the pound take a sharp turn for the worse. With the weaker pound, UK holidaymakers have found that their pounds generally don’t buy as much foreign currency as they expect.

Just as challenging is deciding where to buy your foreign currency and opinion about where to buy is subjective. Most of the accessible information comes from those businesses engaging in tourist currency exchange. Those encouraging you to order your currency in advance or online, may suggest that currency exchange counters at airports, stations and hotels, although convenient, offer the worst tourist exchange rates and that by ordering your currency in advance, you’re much more likely to get a good tourist exchange rate.

Try to get the best value on tourist exchange rates. Do your research, compare prices and then look for the package that will best meet your needs and wants. Decide whether that is cash, travellers’ cheques or a currency card and whether you want home delivery, local collection or pick-up on departure. Also explore whether it comes commission-free and if there’s a good buy-back deal on your unused holiday money available. Finally, just check that the sterling exchange rate for tourists is not in fact better at your holiday destination