The chancellor has spoken and we now know where we stand, at least for the next 6 months (until the full budget). Possibly the most surprising news from this Autumn statement is that it was the last of its kind and next year’s Spring statement will likewise be the last ever. From now on the UK will have annual Autumn budgets and make Spring statements. The least surprising announcement was that the proposed rise to fuel duty has been scrapped. Given that this is the 7th consecutive year the government has frozen fuel duty, this was probably widely expected, but will still probably be welcome news to many people, particularly those who travel frequently. The rest of the budget was arguably a mixed bag. Here is a summary of the three most important areas. The Economy It’s understandable that debate on the economy was overshadowed by Brexit, particularly since, at this point in time, there now seems to be a question mark over whether it will actually happen at all, let alone when and how and what effect it will have. Philip Hammond, however, is essentially obliged to work on the basis that it will and is therefore proceeding with caution. The government has ended its commitment to return to a budget surplus by the 2019-2020 financial year. Instead debt will rise and is forecast to peak in 2017-2018. Personal Finances Pensioners may have raised their eyebrows at the chancellor’s commitment to maintain the triple lock system for this parliament. The triple lock system refers to the practice of increasing the state pension in line with average earnings, the consumer price index or 2.5%, whichever is highest. While it is undoubtedly reassuring to pensioners, it is also expensive and was recently criticised by the Work and Pensions Committee as being both unsustainable and unfair. The fact that Philip Hammond set a deadline on this commitment may be a hint that the government will look to drop it in the next parliament. Interestingly Philip Hammond also suggested a new bond for savers of all ages, paying 2.2% interest. No further details of this were given, but at first glance it sounds like a similar idea to the “pensioner bonds” of 2015 and may be intended to cushion the blow of removing the triple-lock guarantee. For working adults, the chancellor raised the National Living Wage (formerly known as the minimum wage) to £7.50 (from April 2017). He raised the income tax threshold to £11,500 (also effective next April) and committed to raise the higher rate threshold to £50,000 by the end of this parliament. At the same time, he removed the tax benefits on salary sacrifice/benefits in kind schemes, but notably exempted schemes relating to childcare and pension saving along with schemes linked to ultra-low emission cars and the cycle-to-work scheme. Infrastructure The headline-grabbing announcement that the taxpayer would fund repairs to Buckingham Palace was made before the budget and Philip Hammond was also notably silent on the matter of repairing the Palace of Westminster (otherwise known as the Houses of Parliament). He did, however, manage to find a relatively modest £7.6 million to fund repairs to Wentworth Woodhouse, known to Jane Austen fans as the probable inspiration for Mr Darcy’s home of Pemberley. He also committed £2.3B to provide 100,000 new homes in areas of high demand as well as £1.4B for 40,000 affordable homes. The chancellor also promised almost £1.5B to fund various transport projects. The vast majority of this went to improving local transport networks in England with £220M to combat traffic pinch points and £110M for East West Rail. The digital economy was not forgotten with a commitment of £1B to improve broadband access. This is in addition to 100% business rate relief for spending on new fibre infrastructure.

Payment cards have been around for decades now and have transitioned from being read on manual imprinters and validated by signature to being read from a microchip and validated (generally) by PIN. They have now moved into the next stage of their development and can now support contactless payments in which customers literally just tap and go. At the same time, mobile operators and handset makers have caught on to the fact that smartphones are an essential part of everyday life and are attempting to use them to get into the payment market. Apple has launched ApplePay and its Android counterpart is known as Android Pay (although Android giant Samsung has its own version of it called Samsung Pay). The basic idea behind them is the same as for contactless payments, consumers just tap and go. While this is indisputably convenient, questions have been asked about whether or not it offers the same sort of level of security as chip-and-PIN (or signature) transactions. Contactless and mobile payments cannot be as secure as chip-and-PIN payments In the most basic of terms, the short answer is no. There is simply no way a form of payment, which removes the need to verify the identity of the cardholder can be as secure as one which does. A more relevant question, however, is whether or not contactless and mobile payments offer enough security for their intended purpose. Contactless and mobile payments are intended for low-value transactions Contactless and mobile payments are being promoted as a way to speed up high-volume/low-value transactions at places such as fast-food outlets, coffee shops and such like. Basically they are being presented as being a win for both merchants and cardholders neither of whom are likely to enjoy dealing with queues. At current time, the limit for contactless transactions is £30 per transaction and card-issuing banks are able to set their own limits regarding, for example, how many contactless transactions are permitted before the card has to make a chip-and-PIN transaction to confirm that it is being used by the legitimate cardholder. Mobile payments work along similar lines and can offer an additional level of security through the fact that access to the relevant service requires access to the mobile handset, which can be secured through various means, for example Apple now has a level of biometric authentication with fingerprint recognition. Dealing with accidental payments and deliberate fraud Whether or not you class accidental payments on contactless cards as a security issue is a matter of opinion but it is a matter of fact that they can happen. Contactless cards and mobile payments essentially broadcast the relevant card details over a very short distance. This means that, in principle, if you happen to have one or more cards in the vicinity of a card reader, their details could be picked up and you could be charged. In this case, it might be possible to have the merchant cancel the transactions or use a chargeback scheme. There are also some wallets available which claim to be able to block the signal between the card and the reader, meaning that users have to take their cards out physically in order for them to work. As yet, it remains to be conclusively proven how efficient these are. This then leaves the issue of deliberate fraud. The consumer association Which? carried out a study, which indicated that it was technically possible to skim data from contactless cards and use them to make online transactions. These kinds of transactions would, in theory at least, probably be a matter for a chargeback scheme.

Budgeting is the skill of making sure that your pay lasts the whole month, ideally with a little left over. Nobody ever said it was necessarily going to be easy, let alone fun, but it’s essential for peace of mind. Here are five signs that you may need to work on your budgeting and why they matter. You frequently need to “borrow” money (or get other help) from family and friends Life happens and sometimes getting help from your nearest and dearest is the only option, sometimes it’s just a far more attractive option than getting a commercial loan. If, however, you find yourself regularly needing financial (or other) help from those close to you, then it’s time to look closely at your budgeting to see how you can put a stop to this, even if you are managing to pay the money back (eventually). If you’re becoming dependent on financial gifts, or not paying back loans, then you owe it to those you love and to yourself, to sort yourself out. Even if the people concerned can afford it, they need to take care of their own future and living to a ripe and happy old age can be expensive. You’re only making the minimum payment on your credit card(s) The minimum payment is a limit rather than a target. The longer you carry a balance on a credit card, the more likely it becomes that you could wind up paying more in interest than you actually borrowed in the first place. Even if it doesn’t get that far, the simple fact of the matter is that credit cards (and other forms of high-interest credit) are a really expensive way of borrowing money and should generally be paid off as quickly as possible. If you’re only making the minimum payment each month, then you need to take a hard look at your budget to see how you can increase the repayment. You continually find yourself relying on your overdraft Overdrafts can have their uses, particularly for those whose income varies from one month to the next, but ideally they should be used as safety nets for occasional emergencies rather than being used month after month. Another danger of relying on overdrafts is that an unforeseen expense or a bill you’ve forgotten could tip you into unauthorised overdraft, which often carries penalty fees and interest charges. A few of these can add up to become uncomfortably expensive. You have nothing left over at the end of the month Even if you don’t actually have any debt, even if, in fact, you do actually have some savings, running down to zero by the end of the month is generally best avoided if at all possible. There are many reasons for this. One of them is that if you have any sort of unexpected expense, then you’ll have to dip into your savings to pay for it and then how will you replace those savings? You’d be hard-pressed to say where your money is actually going The main purpose of budgeting is to make sure that you’re managing your money appropriately. Its usefulness is probably most obvious to those with little money who need to make sure that they cover all their essential expenses and see if they can possibly squeeze out a little extra to put aside for emergencies. It is, however, still useful for those on higher incomes for whom getting from one pay packet to the next is less of a concern. Basically you can only know whether or not you’re making best use of your money if you actually know where your money is going in the first place.

Whatever criticisms can reasonably be made about annuities, they do have one great benefit. They are simple. You make a one-time purchase in return for which you get an income for life. Unfortunately that income may not be anything close to what you hoped it would be. In recognition of this, the government brought in pensions freedoms, which essentially give today’s generation of retirees the ability to keep their pension funds invested and draw an income from them instead of having to buy an annuity. While this idea sounds attractive in principle, it’s worth thinking about whether or not it could feasibly work for you in practice. The background to pensions freedoms While none of the main political parties has yet to make any serious move to abolish the state pension, the fact of the matter is that it is a significant drain on government funds, particularly in view of longer life expectancy. With that in mind, there has been general agreement across the main parties, that people should be encouraged to save for their later years. The problem was that recent decades have seen a perfect storm in the pension market. Defined benefits (final salary) schemes have been largely eradicated from the private sector. Their place has been taken by defined contributions schemes in which the eventual pay-out is based on investment returns rather than pegged to an employee’s salary. The Equitable Life and Mirror pensions scandals shook confidence in private-sector and employer-based schemes respectively. To crown it all, the restrictive nature of annuities was a source of frustration for modern retirees, who wanted more flexibility than the product was designed to offer. In an attempt to push forward the principle and practice of individuals saving for retirement, the government offered new pensions freedoms designed to address the needs of today’s generation of pensioners. One of these freedoms was the ability to use a pension fund in essentially the same way as any other form of investment capital, with all the potential for risk and reward this entails. Having a right does not mean that it is a good idea to make use of that right With freedom comes responsibility. In this case, the responsibility for ensuring that a pension pot lasts a lifetime is shifted from the annuity provider to the private individual. Unless the person in question has a guaranteed income from another source, they are in essentially much the same position as a professional gambler. Their income is entirely dependent on the performance of their investments. Now, there are people who make a lot of money as professional gamblers but it is unarguably a risky profession and one which requires commitment in terms of time, energy and mental strength. Some older people may enjoy this slightly edgier lifestyle, while others may have alternative incomes (such as buy-to-let or income from part-time businesses), which mitigates the risk, but for everyone else the potential rewards on offer thanks to pensions freedoms has to be weighed up carefully against the potential risks. Older people also need to be aware of and realistic about their chances of succumbing to age-related conditions such as dementia and Alzheimer’s disease. What options are available? Arguably anyone with any sort of financial responsibility should have measures in place to ensure that their financial business can be managed easily in the event of their becoming incapacitated and wound up easily in the event of their death. Those entering the later stages of life should certainly take care of this while they are still able. They should also think clearly about the different stages of aging and be realistic about how they are going to cope with them. One approach might be to ease into retirement and to keep working to some extent in order to minimise the need for pension income, while keeping the pension pot invested and, hopefully, growing. They can then buy an annuity at a later date, when its simplicity becomes more appealing and the rate on offer is likely to have increased as the individual will be older at the time of its purchase. The value of investments and any income from them can fall as well as rise. You may not get back the amount originally invested.

The Markit/CIPS purchasing managers’ index (PMI) is a monthly survey which is eagerly watched by those with an interest in the financial health of UK PLC. This month, the August data for the crucial service sector showed healthy growth. A trampoline or a dead-cat bounce? As Harold Wilson is said to have remarked, a week is a long time in politics. It is now two months and counting since the historic Brexit vote and while the jury is still out on what that vote actually means in reality, in the real world of the high street and online, the dust appears to be at least starting to settle. The July data for the PMI showed a decline, hence at least part of the increase this month is simply regaining the lost ground, but it is still growth rather than decline. It should also be noted that August is an unusual month in that it contains extended school holidays as well as a bank holiday (in much of the UK). It is therefore a time when the leisure, entertainment and hospitality industries would be expected to be pretty much in full swing. Economists are therefore likely to be watching eagerly to see if this strong performance continues over the run-up to Christmas and beyond. Financial services in a fragile state? While the service sector has many components, it’s hard to dispute the importance of the financial services sector and there are still jitters in this area, some of which may be connected with Brexit. It was only shortly after the Brexit vote that Lloyds announced job losses in the UK. It is, however, unclear just how much, if any of these announced cuts, was actually due to Brexit itself. While the UK could, in principle, lose its right to act as a clearinghouse for Euro transactions, the jobs which are currently being lost have nothing to do with this area. They relate to branch closures and the harsh reality is that as customers have moved to online banking, the need for physical branches has been reduced, hence their vulnerability to cost-cutting measures. This has nothing to do with Brexit; it is a reflection of changing consumer habits. Lloyds has also admitted to being under investigation by the Financial Conduct Authority due to its behaviour towards customers who were having difficulty paying their mortgages and could feasibly have more potentially costly skeletons rattling in its cupboards. It also has to consider how an extended period of ultra-low interest rates could affect its profitability (and indeed business model). Other banks will have their own strengths and weaknesses and while none may be overjoyed by Brexit, it remains to be seen in what way and to what extent it will affect them. Will manufacturing benefit from Brexit? While the service sector plays a crucial role in the UK economy, it’s worth remembering that the manufacturing sector also contributes. As with so much to do with Brexit, it’s still very early days, but a weak pound could be great news for UK manufacturing. Even though it will mean that the import of raw materials becomes more expensive in real terms, it can help to make UK exports more affordable on the international market. It can also help to reduce the cost of employing workers in the UK as compared to those in lower-wage economies. The outlook for UK manufacturing may also depend on global oil prices since manufactured goods need to be physically transported from the factory to the retailers. Low oil prices benefit companies which want to transport goods over long distances, such as between Asia and Europe. If oil prices increase, then transport costs can become more of an issue, which makes it more attractive to manufacture goods closer to their intended destination.

As the old saying goes, if a job’s worth doing, it’s worth doing well. This is why companies look to find the best candidates for any given position, be it entry-level or senior management and also why they look to hold on to good workers. Obviously there is a monetary element to worker retention, but there are other ways to increase the odds of your staff staying with you. One of these elements is the aspect of health and happiness in the workplace. Ill health can force early retirement Recent research by the TUC showed that ill health forces up to 12% of workers to retire up to 5 years before their planned retirement date. The research highlighted the potential challenges involved in raising the state retirement age in response to extended life-spans. In simple terms, we may be living longer but that does not necessarily mean that we are able to go on working for longer. Whether or not it is feasible for any given individual to go on working into their late 60s and 70s depends on a number of factors. Some of these involve circumstances beyond an employer’s control, such as their family-health history, but others can be influenced by the workplace. Employers will already be aware of health-and-safety legislation and their legal obligation to keep their employees from being unreasonably exposed to harm at work, but there are many more steps employers of all sizes can take to promote healthy living on the part of their employees. This cannot only help them to make the most of older people in the workplace, but can also help to reduce disruptive absences due to sickness. Appreciate ergonomics and use them wherever possible Repetitive strain injury is a risk in any occupation where people repeatedly undertake a habitual action. In these days it is often associated with office workers using keyboards and mice, but it actually occurs across a variety of occupations “housemaid’s knee”, and “tennis-player’s elbow” are examples of this, even card dealers can get RSI from the recurring actions involved in dealing cards. Take a look at what your company does and how it does it to help to avoid these kinds of injuries. The growing-bigger problem It’s unlikely to come as a surprise to anyone that people in the UK are growing bigger and it’s not necessarily healthy. While the fundamental reason for this is that people are consuming more calories than they need for their lifestyle, the reasons why this is the case may vary. Employees may not know about healthy eating, in which case fun, work-place based events to educate them may make a difference. Alternatively, it may be an issue with time pressure, in which case there may be steps you as an employer can take to help them and thereby to help yourself. For example, you may find you need to wean people off a culture of working through lunch and into one of taking a break to eat properly and rest their minds. You may also need to encourage people to leave at the end of a standard work day, instead of working extensive overtime on a regular basis (even if it is paid). This may mean taking on more staff or outsourcing work to agencies or freelancers or automating it. The cost of this needs to be seen in the context of avoiding losing an employee and having to go through the recruitment process again, with all the disruption that can cause. Exercise is about more than just weight Possibly the most obvious reason for exercising is that it helps people to keep their weight down, but it can have other benefits too, for example team or club sports can have a social element. Even when budget is too tight for subsidised gym membership or other perks, there may be ways you can help. For example you could participate in the government’s cycle-to-work scheme.

There are winners and losers in every change and this also holds true for changing currency values. In the most basic terms, a weak pound means that you need more pounds to buy other currencies and less of another currency to buy pounds. An effect of this is that in practical terms, it costs more to buy in goods from overseas and less for people overseas to buy goods from the UK. As with many aspects of life, however, in the real world the situation can be a bit more complicated. Let’s take a look at how a lower pound can impact the high street in ways which may be less than obvious. House prices and the high street The UK housing market is core fodder for the press and can easily make headlines in the main body of popular newspapers rather than simply being relegated to the financial section. The weakness of the pound is almost guaranteed to have an impact on the housing market, although precisely what that overall impact will be is still unclear. The lower cost of doing business in the UK may attract international buyers and investors, but it may also make life more challenging for those looking to move abroad, who need to be able to finance a property purchase there. It may also influence how many international construction workers and tradespeople work in Britain. If house prices show signs of rising, then this may increase consumer optimism, but it may also mean that first-time buyers and those looking for bigger property may start to channel their disposable income into building up a deposit rather than using it for consumer spending. If house prices fall, it may drive some home owners into negative equity, for which they may try to compensate (or be obliged to compensate); thereby reducing the income they have available for consumer spending. On the plus side, however, lower house prices are great news for first-time buyers (and tend to be good news for those trading down), who could then use their disposable income on house-related consumer purchases (new appliances, furniture, décor etc.). Holiday prices and the high street Low fuel prices may be good news for the aviation industry, but a weak pound makes foreign holidays more expensive as it raises the effective price for everything from accommodation to food and entertainment. While the obvious candidates to feel the pain of this are travel-related companies such as travel agents and airlines, this could also have a trickle-down effect on other businesses. For example, holidays abroad can entail the purchase of new luggage, clothes and toiletries and may involve spending at airport stores. If foreign holidays become too expensive for the average consumer, they may choose to save their money instead, which could have a negative impact on the high street, alternatively they might choose to spend their money in other ways, in which case the high street might even benefit. Employment and the high street Employment is a major factor in whether or not people have disposable income to spend on the high street. A weak pound can make UK exports more attractive, although exporters will still have to account for the cost of buying in materials from overseas. A weak pound can also make the UK a more attractive prospect for investors when compared to lower-wage economies. At the same time, it can make imports more expensive and leave some retailers with a decision as to how much of the price increase they can absorb and how much they can, or want to pass on. If there is high employment, retailers may opt to absorb the price increases and compensate for the weak pound with higher demand. If, however, employment is weak, then retailers may have little choice but to pass the cost on to those who can still afford to pay it.

In principle, interest rates and inflation act a bit like a child’s see-saw. When interest rates go up, people are encouraged to save rather than spend. This reduces demand, which encourages suppliers to lower their prices, which results in lower inflation. When interest rates go down, the reverse happens. That, at least, is the general theory. Of course, in the real world, many other factors can come into play. For example, if there is a bad harvest, then the price of the affected crop is very likely to go up regardless of what happens with interest rates. Inflation and the economy While the idea of continually-increasing prices may seem like bad news, it’s actually fundamental to a healthy economy. In essence it acts as a “call-to-action” to consumers, preventing them from waiting for prices to drop further. An example of how this works in practice can be seen in the stock market. When a company is experiencing steady growth, consumers are happy to buy its shares in the expectation that they will see a return on their investment. When a company’s stock price begins to drop, existing investors may try to sell their shares to mitigate their own losses, while potential investors sit on the sidelines to see how far the price will drop. At its most extreme, this sort of behaviour can lead to the classic “boom and bust” cycle. Interest rates and asset prices Interest rates can influence asset prices, including house prices. When interest rates go down, the cost of borrowing typically becomes cheaper. Up until relatively recently, this had the potential consequence of allowing consumers to take out larger mortgages, meaning that they were able to buy more expensive properties. Hence lower interest rates had the potential to feed into the demand for property and therefore to increase house prices. In recent times, however, the mortgage market review has tightened up the mortgage-lending market. Specifically it has forced lenders to look very closely at the likelihood of borrowers being able to manage a mortgage over the long term. This includes considering factors such as the potential for higher interest rates and the potential for borrowers to experience a reduction in income (or even a temporary loss of income). In principle, this could mean that, going forward, the level of interest rates at any given moment has, at most, limited influence on the housing market. At this point, however, it is still rather early to draw definite conclusions about this. The Bank of England and the Monetary Policy Balancing Act One of the Bank of England’s responsibilities is to try to ensure that the UK experiences steady economic growth. Specifically, the Bank of England Monetary Policy Committee aims to ensure that the UK experiences continual inflation of exactly 2%, neither more nor less. Of course, even Olympic archers miss the absolute centre of the target some of the time and hence it is considered acceptable for inflation to be between 1% and 3%, if, however, it is any lower or higher than this, then the governor of the Bank of England has to write an open letter to the Chancellor of the Exchequer to explain why this has happened and what the Bank of England proposes to do about it. Over recent years, a sluggish economy has seen interest rates kept very low. Because of this, there is a case for arguing that, realistically, there is only one way for interest rates to go and that is up. While this may be true over the very long term, it is entirely possible that the Bank of England will hold fast to its current low-interest-rate policy until there are very clear and consistent signs of growth in the UK economy.

We hate to be the ones to say it, but now probably really is a good time to start watching your pennies in readiness for Christmas. We know it’s in December but for those who are paid monthly it’s 4 or 5 pay packets away (depending on exactly when you get paid). Looked at from that perspective, it makes sense to start saving now, even though (hopefully) it’ll be some time before the carols start playing. To help you get started, here are 6 really obvious ways to save money. Cull regular expenses you only use occasionally (or never). Gym memberships are the obvious example of this. While pay-as-you-go rates can work out more expensive for those who go to the gym several times a week, for those who go less often, they can actually work out cheaper, plus there are lots of other ways to exercise both indoors and outdoors, without the need to pay regular fees – even for those who live in shared accommodation and studios. Subscriptions are another category to check, magazines, online entertainment sites, food parcels, if you’re not getting full use out of them, then unsubscribe. Eat more home-cooked food Eating out can be fun, but meals out, take-aways and ready-meals all cost more than food prepared at home. Even buying ready-to-use ingredients such as jars of pasta sauce generally costs more than buying the ingredients and making them yourself. We appreciate that if you don’t like cooking it can be a chore to come in tired after work and then have to make yourself something for dinner and then prepare a packed lunch for the next day (or do it in the morning when you’d rather be in bed) but you can break yourself in gently. Even if you start by only cooking at the weekends, freezing a couple of portions and making one packed lunch for Monday, you’ll still be starting to save the pennies and as you get better at cooking and managing shopping, you may find you can do more than you thought. Learn to ignore food packaging and to look at ingredients instead Premium food brands with high-quality, attractive packaging may indeed be worth the extra money – or they may not. A look at the ingredients should give you a good idea as to whether or not the higher price is justified. For basic items you may well find that supermarket own brands and such like are every bit as good as their more expensive counterparts. Use up what you have before you buy the same or a similar item If you have a drawer full of T-shirts, you don’t actually need any more no matter how good they look or what a good price they are. If you’re a (paper) notebook lover and you already have a stack of them, you don’t need any more, even if they’re on special offer. Basically if you already have a stock of something, whatever it is, use it up first before you buy any more. Be suspicious of special offers Some special offers can be very good value, but some simply tempt us to spend money on items we would otherwise have ignored. It doesn’t matter how cheap something is or what a good discount it is, if you don’t really want it and won’t actually use it or are only using it because you’ve bought it, then it’s probably a waste of money. Learn to love pre-loved New may be nice but pre-loved can be much more prudent financially speaking. In particular, if you know you don’t actually need to very latest model of phone/tablet/other consumer electronics item, then you can potentially make meaningful savings by going for a refurbished “last generation” item.

At this point in time, the economy seems to be dominated by one word “Brexit”. While the whole country is waiting to see what exactly will happen when, it’s difficult to make any sort of predictions for the future, so instead we’re focussing on the present with our 10-minute guide to the economy. The housing market A mortgage is a long-term commitment and as such both the lender and the borrower need to feel confident that the latter will be able to keep up with the repayments over the long term. Jitters over potential job losses, particularly in the banking sector and fears that falling demand (due to reduced immigration and/or the repatriation of current immigrants) are unhelpful for the mortgage market and therefore unhelpful for the housing market. The financial sector For better or for worse the FIRE (Finance, Insurance and Real Estate) sector plays a key role in the UK economy. At the moment, it is an open question whether or not the financial services sector will hold on to its coveted passports, which enable them to sell their products and services throughout the entirety of the common market. It is also an open question as to whether or not they will continue to be able to process transactions in Euro from the UK. Some banks, such as Lloyds, have already announced job losses in the UK, although it is unclear whether or not this is directly (or even indirectly) connected to the issues surrounding the Brexit. Online banking and the move to digital payment methods (such as Visa, MasterCard and PayPal) has reduced the need for customers to visit branches, while demographic movements can see formerly busy branches losing customers to other locations. The Bank of England (interest rates). The Bank of England has made it clear that it will do everything it can to keep the good ship UK PLC on a steady course, even if it is through uncharted waters. The BoE essentially has two key weapons at its disposal, the option of making low-priced (or even free) credit available to banks (which, in theory should be passed on to businesses and other consumers) and interest rates. Its challenge is to provide enough stimulus to keep the economy moving without providing so much that investors get nervous about the state of the UK economy, which could lead to the UK having its credit rating downgraded, thereby making it more expensive for the UK itself to service debt. At the moment, the BoE is essentially feeling its way through a new situation along with everyone else and only time will tell how well it will manage its task. The retail sector The big news in the retail sector has arguably been the demise of BHS, however given the history behind that company’s woes it would be very difficult to pin this on Brexit. Likewise Marks and Spencer’s clothing arm saw dismal sales in the first quarter of 2016, prior to the result of the referendum and it remains to be seen how well Marks and Spencer will address the issues which led to this. The issue facing the retail sector is, of course, that it relies on consumers spending money, which means that it relies on consumers having money to spend. If consumers are uncertain about their job prospects, then it is entirely possible that they will rein in their spending, which, of course, hits retailers who specialise (or generate significant income) from discretionary purchases. For this reason, any weakness in the pound is bad news for companies which rely on imported goods (or on imported materials to make goods at home) as this increases the effective price, which means that vendors have a choice between cutting into their own margins (if they have room to do so) or passing the cost onto consumers and accepting that this may make them less attractive.

Although it may not seem like it at first, interest rates really are interesting. High rates are great news for savers but bad news for borrowers and vice versa. Regardless of whether you’re a saver or a borrower, it’s important to understand 4 key points about interest rates. For savers interest rates are in a race against inflation Life is often a balancing act between conflicting goals and possibilities. In financial terms, this generally boils down to risk versus reward and/or cost versus benefit. Higher-risk investments can offer the possibility of great returns but, pretty much by definition, there is also the possibility of losing your initial investment. Cash savings can be viewed as safe in the sense that there is a relatively low risk of the saver losing their deposit, but if inflation (the cost of living) outpaces interest rates (the return on investment), savers can find their nest egg losing its value in real terms. This can be particularly challenging for older people on fixed incomes (pensioners) who do not necessarily have the long-term investment horizon of the younger generation but who do have a need for a reliable source of income to maintain themselves. The interest rates available to consumers may be completely different to central-bank rates About once a month, the press reports on the activities of the Monetary Policy Committee of the Bank of England, which sets the Bank of England’s interest rates. These are the rates charged (or paid) to banks which borrow from or deposit with the Bank of England. These rates may then feed through into consumer products such as savings accounts, mortgages and credit cards, some of which track this base rate. Some products, however, are fixed-rate and hence are unaffected any changes to the interest rates set by the Bank of England for the life of the fixed-rate deal. The key point to understand is that the interest rates offered to consumers are influenced by a number of factors as well as the base rate. Some of these are generic, such as what the banks think of the economy in general. Some, however, are specific to each individual, such as their credit history. Then, of course, there is the simple fact that banks need to pay their own bills and make a profit for their shareholders. The same product can have different interest rates, applied in different ways Credit cards in particular can charge different interest rates for purchases and cash advances (this is in addition to any fees they charge on cash withdrawals). In addition to this, the interest levied on purchases may be applied after a grace period, whereas the interest levied on cash withdrawals may be applied straight away, even if it is only actually charged when the monthly statement is created. If you would like to check this then it should be make clear in your terms and conditions, although you may find it easier just to send a message to your lender’s customer-service team to put the question to them directly. Interest can be simple or compound With simple interest, the interest payments are calculated purely on the basis of the initial sum deposited or lent. So, for example, if you deposit £100 then the interest you receive will always be based on that initial £100. With compound interest, however, interest is calculated on a rolling basis. Hence for example, if, after the first year you had received a total of £10 in interest payments, your next year’s interest payment would be calculated on the whole £110 rather than just the £100 you initially deposited. This is great news for savers but, of course, terrible news for borrowers and is part of the reason why those who take out high-interest credit can wind up paying more in interest than they borrowed to begin with.

It was the result which took the bookmakers by surprise. Maybe it would have been different if the weather had been dry and sunny in the South East of England. Since you can’t run history twice, we’ll never know. What we do know is that the UK as a whole voted to leave the EU, so let’s look at what that means in practical terms for those seeking to take care of their finances. Impact on the Pound The pound dropped in the run up to the referendum, but began to climb again as polls indicated that the Remain camp had secured a significant lead. Notwithstanding this, the news carried stories of panicked travellers queuing to secure their holiday funds before a potential Brexit saw a drop in the value of the pound. Brexit is now confirmed and it is only to be expected that, in the short term at least, it will have an impact in the value of the pound. A drop in the value of the pound is, of course, bad news for holidaymakers (and the companies which serve them) and it’s bad news for those who depend on imports. On the other hand, it makes the UK a cheaper holiday destination for people from overseas and it’s great news for exporters. Impact on Business as a Whole Obviously any impact to the pound could have a knock on impact to UK-based companies. Those that benefit from a strong pound could be hurt by a fall, whereas those who aim to attract custom from overseas could benefit from it. Access to the EU’s single market is a more interesting issue. The Remain campaign touted it as one of the major benefits of membership. The Leave campaign, however, pointed out that trade is (or should be) a two-way street and that countries which set up trade barriers against UK exports can expect to have their own exports treated the same way. How this works out in practice remains to be seen. It also remains to be seen what impact this will have on the highly-controversial TTIP(The Transatlantic Trade and Investment Partnership). In the short term, it is highly likely that there will be a drop (or at least volatility) in the stock market; this could open up a window of opportunity for investors to find bargains amongst companies with solid fundamentals, which have simply been caught up in economic turbulence. Impact on the Financial-Services Sector At the moment UK financial institutions can operate across the EU under one licence (or passport), whether or not they retain this ability depends on a number of factors. If the UK moves, more-or-less seamlessly into the EEA/EFTA then it could feasibly be business as usual. If not then the UK would have to negotiate specific agreements with its former EU partners. Given the strength of the UK’s financial-services sector and the fact that European rivals would presumably love the opportunity to take over business from them, then this might prove trickier than negotiating trade agreements. Impact on the Housing Market If the UK’s population drops then it seems a reasonable assumption that the demand for housing (to buy or to rent) will also drop and since prices in a free-market economy are a function of supply and demand, it therefore follows that prices for accommodation will also drop. As is so often the case in life, there are winners and losers in this situation. While sellers and landlords may regret the reduced demand, the plight of “generation rent” and “would-be first-time buyers” has been a constant source of news topics and any fall in house prices (or rental prices) would presumably be welcomed by them. As with all changes, it makes sense to not make rash decisions based on yesterday’s vote but to take a view on what’s happening and keep an open mind. There will be initial fallout – for instance the drop in the pound but over the next few weeks the dust will clear and ways to move forward will become clear.