Making sense of this crazy world
As we suspected, there was nothing too onerous in the Budget. The Chancellor, John Healey, appears to have created some breathing space for the economy. There is no doubt that the Burnham administration was and is wary of adverse market reactions. On reflection, there was a relatively modest set of changes and, in the main, it focused on prioritising short-term relief to households in receipt of lower income, albeit with some implications for businesses, good and bad.
I won’t be running through all the detailed changes here today. We will run through the tax planning opportunities at our seminar on the 11th November in Christchurch, and then periodically focus on specific changes and possible strategies, via a series of blogs.
Forecasts for the UK economy are somewhat mixed, but plumping for UK equities against tech stocks is most likely to defend any portfolios as the UK typically is more resilient in such periods of downturn.
Tech stocks rose strongly towards the end of last week and early this week, but mixed results have tempered enthusiasm for the time being. Overnight, tech stocks tumbled as Intel and Amazon results disappointed.
It doesn’t appear to be a natural progression moving from the police force to being an AI entrepreneur backed by Silicon Valley, but this has happened to an ex-Merseyside senior police officer.
Our attention now turns to the US mid-term elections. Markets have been choppy and are likely to become more volatile in the short-term but this will undoubtedly present opportunities. Earnings are still expected to be strong, and many shares are now cheaper on a price-to-earnings ratio than they were some months ago.
This week’s content:
- The Budget
- Our high street
- Perspective on UK equities
- Bank earnings power on
- Tech stocks rise
- Mixed AI results
- Ex-Merseyside police officer has raised funding from Silicon Valley
- It’s the US mid-term elections next week
- Conclusion
The Budget
The Office for Budget Responsibility (OBR) tells the story from an economic perspective:
The forecast for economic growth was nudged up to 1.2% this year, but next year’s forecast has been cut from 1.6% to just 1%. UK government debt interest costs are £14 billion higher this year, which has eroded the Chancellor’s ‘headroom’, the safety buffer before he has to break the governments own borrowing and debt rules.
The key takeaways from the Budget are that energy-driven inflation and higher-for-longer interest rates remain a live risk and events abroad could matter as much as anything announced in the House of Commons. The most significant change for many business owners is that the Business Asset Disposal Relief limit has been halved from £1 million to £500,000.
UK banks face an extra 3% surcharge on their profits, lower than expected but still a modest headwind.
Continues…
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