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Issue 32 - The Roadmap Out of Lockdown and Budget Announcements

As the vaccination programme continues to roll out in the UK at an increasingly impressive rate, we also now have details that Boris Johnson has provided in terms of the timescale to apply to his roadmap out of lockdown.

Whilst I appreciate a lot of these aspects, and in particular the timing, are all subject to the statistics continuing to go in the right direction, the general view that I am hearing is a sense of relief that the “end is in sight.”

It is also good to see that the roll out programme is accelerating in the US and I had a message from one of our clients in Chile earlier in the week, saying that the programme there is well ahead of other South American countries in terms of their vaccination programme roll out.

Whilst there are concerns about variants and more aggressive contagion rates, we are in a much better place, but just have to hope that people don’t go too mad too soon!

Yesterday, we also saw the long-awaited Budget from Rishi Sunak, which in itself, was almost unique, but quite unremarkable in many ways!

Unique in the sense that the level of borrowing that has had to be entered into is on a relevant scale that was only equalled during the two World Wars, and therefore, no peace time Chancellor has had to wrestle with the levels of borrowing that have been required as a result of Covid 19. I felt that overall, he delivered a very logical Budget and whilst it left some people crying foul because their sectors were not specifically helped, overall, I think it was very good, given all the circumstances.

One sector that are unhappy is the airline and travel industry and I get the feeling that there is a certain element of presumption that the industry is big enough to sort itself out once the demand comes back from the general public.  In fact following the announcement of the road map, the on-line bookings with travel companies rocketed for travel after May 17th and this is a fair indicator.

I have some sympathy though for the airline industry because there is a similarity here with our own industry when it comes to the post Brexit rules, with Financial services largely being ignored from the trade agreement.  Once again, the belief is that the industry is big enough and robust enough to sort itself out, which it may well be, but it doesn’t make it easy!

Although we know that tax rises are inevitable, the combination of the freezing of personal allowances and tax bands for Income Tax and the introduction of higher Corporation Tax with effect from April 2023, do help to spread the pain that these will bring and certainly from a personal taxes point of view, the pain will grow over time, but as long as inflation remains low, the pain should not be too great.

Although increasing the headline Corporation Tax from 19% to 25% seems like a huge jump and in percentage terms it’s over 30%, it is worth remembering that this will still leave the UK with the lowest Corporation Tax rate of all G7 countries – albeit only just, and I think therefore, the UK remains a competitive environment for business and I am sure this would have been in the Chancellor’s mind because the last thing he wants to do is anything that would dampen business potential going forwards.

There were various other aspects that were frozen in terms of National Insurance and Inheritance Tax, but the one key area dealing with Capital Gains Tax was not addressed, albeit that I think this is a delay rather than the cancellation of a review – more to come on this is suspect in the Autumn.

On the flip side, the extension of the furlough scheme and increasing help for the self-employed has to be a positive thing, albeit that it leads to even more borrowed money that will need to be repaid in due course.

I also think, some of the underlying economic details that we have seen and forecast, suggest that the rate of recovery in the UK, both this year and next, is likely to be much higher than was previously anticipated and that the peak in unemployment numbers is likely to be substantially lower than those that were previously forecast prior to Christmas.

We are a long way from being out of the woods, but I think there are a lot of positive and encouraging signs that we are starting to see – long may that continue.

Acceleration of Technology

As so often happens in times of extreme circumstance, we see a number of things that can be accelerated beyond the pace that they were already following.  We’ve seen this in the High Street for example, with the closure of some very large brands in favour of on-line shopping.  This was a trend that was on the way anyway, but lockdown simply accelerated the process.

In our own industry, a similar influence is being seen with the use of technology. 

Even with our little firm, over the last 12 months, we’ve managed to maintain our meetings with individuals on a personal basis by doing so over the Internet, with our favoured solutions being Zoom or MS Teams.  This is because in addition to being able to see and hear the people you are talking to, we can share our computer screen so that we can share data that we can look at during the meeting, which is all very helpful.  It’s not as good of course as meeting face to face and sharing a cup of tea or coffee, but nonetheless, it is a solution that is becoming much more widely used all round.

I have actually been partly surprised, but delighted, with the take up rate that people have volunteered generally and the willingness to actually embrace technology, which has led to me giving some thoughts as to how we should be embracing more technology solutions to improve the services that we offer and sharing information etc.

With this in mind, I think it would be extremely helpful to obtain some feedback from all of our clients, and therefore, I am proposing to put together a short survey that I will circulate and ask you to consider completing.  This will really be looking at different types of technology that we might use and to again your opinions as to which would work for you and which you would be opposed to.

This will also give us the opportunity to ask one or two additional questions to make sure that we are providing clients with all that they would like to receive.

I appreciate though that surveys can be an absolute pain and therefore, if you would rather not be included in this process, perhaps I could ask you to reply to this e-mail, just simply to say that you would like to be excluded and I will make sure that you’re not bothered with that request when we are ready to process it.

I would anticipate being able to circulate this during the course of the next 4 – 5 weeks.

Market News

Before closing, I’ll just make a few quick comments about markets, which over the last months have shown some volatility, but are largely positive, albeit that we have seen some downward pressure on equity markets as a result of concerns over increasing Bond yields.  What does this mean – it’s an indication that returns on Government debt, like UK Gilts and US Treasuries, are increasing, which leads to the fear of the potential for increased interest rates.  I know savers would welcome the increasing of interest rates, but as far as the economy is concerned, and come to that when considering the mountains of Government debt all round, low interest rates for the time being are going to be maintained and therefore, I view the Bond yield jitters to be of a temporary nature.

It’s actually quite amazing how readily we accept huge amounts of debt and how this has changed over the years – my quote for today comes from Shakespeare in Hamlet ‘neither a borrower nor a lender be, for loan oft loses both itself and friend’ – those were the days!

As always, take care and we will keep in touch.

Best wishes

Richard, Chris and Lesley

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