Archives August 2016

Property is a Better Retirement Plan than Pensions, says Bank of England chief economist

The Bank of England’s chief economist has claimed that investing in property makes for a more profitable retirement plan than a pension.

Speaking in an interview with the Sunday Times, Andy Haldane, who has worked for the Bank of England since leaving university, expressed his belief that, ‘Property [is] a better bet than pensions’ when it comes to saving for the future.


Mr Haldane highlighted the supply and demand imbalance in the UK property market as the key factor in his conclusion that property makes a better financial retirement plan than the pensions’ system.


‘It ought to be pension but it’s almost certainly property. As long as we continue not to build anything like as many houses in this country as we need to … we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.’


Mr Haldane’s comments follow the introduction of new pensions reforms in April last year, which saw pensioners able to withdraw money from their annuity and place it within other investments and financial options.


The removal of pension restrictions saw a surge of new buy-to-let mortgages become offered on the market due to demand from pensioners looking to invest their money into property.


Record Foreign Investment in the UK

The UK has experienced record breaking investment from foreign businesses over the course of the last financial year.

 

The newly appointed International Trade Secretary, Liam Fox, announced that in the year to April 2016, there were a total of 2,213 investment projects made by international companies in the UK – an increase on 11% on the previous year.

Figures from the Department for International Trade stated that a total of 116,000 jobs have been created or safeguarded over the past year, bringing the total number of jobs created in the UK through foreign direct investment since 2010 to almost 390,000.

Commenting on the figures, Mr Fox said: ‘These impressive results show the UK continues to be the place to do business.

‘We’ve broadened our reach with emerging markets across the world to cement our position as the number one destination in Europe for investment.

‘This continued vote of confidence in the UK will help attract foreign investment to create jobs, security and opportunities for people across the UK.’

In line with the continued plan for the creation of a new Northern Powerhouse region, the greatest increase in investment was found across the North of England.

The North West saw an increase of 118% year-on-year, whilst the North East and Yorkshire and the Humber saw a rise of 83% and 66% respectively.

The biggest increase in terms of job roles was seen in the Midlands, where a total of 14,797 jobs were created between April 2015 and April 2016.

With more than 570 projects, the US has remained the largest provider of new projects within the UK, with China and India following suit with a total of 156 and 140 projects each.

Released today, the figures do not provide coverage of the period following the UK’s decision to leave the European Union, but deals such as the sale of ARM Holdings to Japanese firm Softbank, completed for bn last month are indicative of a willing market for UK property.


Bank of England Cuts Interest Rates to Record Low of 0.25%

The Bank of England has lowered the base interest rate to 0.25% – a 322-year record low for the United Kingdom.

As was widely expected in the run up to this afternoon’s announcement, the Bank of England (BoE) has cut UK interest rates for the first time since March 2009, lowering rates from 0.5% to 0.25%, with a unanimous vote from the Monetary Policy Committee (MPC).

In addition to cutting interest rates, the BOE also announced an additional billion quantitative easing (QE) package – extending the QE programme currently in place to billion in total.

Furthermore, billion in electronic cash will be created to acquire corporate bonds from firms – making a substantial contribution to the UK economy.

A new scheme has also been created to provide as much of billion of new funding to banks. Under this new “term funding scheme” the Bank will create new money to provide loans to banks at interest rates close to the base rate of 0.25%.

Following the announcement, the value of sterling also fell, falling by more than 1.5 cents against the US dollar to $1.315 in the immediate aftermath of the decision.

Speaking to the press shortly after the announcement was made, governor of the Bank of England, Mark Carney, said: ‘The UK can handle change. It has one of the most flexible economies in the world. It has a deep reserve of human capital … and its people are admired the world over for their strength under adversity’.

Directly addressing the measures implemented by the BoE today, Mr Carney also said they were aiming to ‘reduce uncertainty, and blunt the slowdown’ with the decisions made by the MPC being described as ‘timely, coherent and comprehensive’. He also added that all of the measures seen today could be expanded in future if necessary, including further cuts to the base interest rate.