Another month has passed and it is time for our look back – this time at April. It was a month that brought us a Far Eastern bromance that would have seemed impossible at the beginning of the year. In the UK there was a wash-out Easter which brought more gloom for the high street, and the beginning of the new tax year and its inevitable good news/bad news headlines. Let us look at the month’s key events in more detail…
Please note that nothing in this Economic Round-Up should be taken as financial planning advice: it is for general information and interest only.
The Big Story
The meeting between the leaders of North and South Korea was clearly the month’s most important event – but it is not going to impact the lives of people reading this round-up. The tax changes which came with the beginning of the new financial year will do, and we have summarised them below. If you would like to read about them in more detail, you can read our full article on the changes here, but here is the summary:
The National Living Wage for those aged 25 and over has gone up from £7.50 an hour to £7.83 an hour. There are also increases for younger workers.
The personal allowance – the amount you can earn before you pay tax – is also increasing, and is now £11,850. The personal allowance does decrease once you are earning six figures, reducing by £1 for every £2 you earn: so anyone lucky enough to be earning £123,700 per year will have no personal allowance. If you pay higher rate income tax, then you now start paying at a salary of £46,350 per year, compared to the previous £45,000 per year.
Pensions are increasing – they are going up by 3%, meaning an increase of £3.65 a week for those in retirement.
The petrol fuel duty stays frozen for the eighth year in a row: it is currently 57.95p per litre.
Council tax is going up around the UK. Our ‘bad news section’ starts with an average rate of increase of 5.1% – if you are in London, that will mean an extra £55 per year for the average property.
The sugar tax is here. From April 6th manufactures of sugary drinks will have to pay the Sugar Levy: it is thought that the levy will increase the price of a typical can of fizzy drink by around 8p a can.
An increase in pension contributions. Many people reading this will have been ‘auto-enrolled’ in workplace pensions. From the beginning of April, the amount you will contribute will rise from a minimum 1% of earnings to 3%. This will obviously result in lower take-home pay and for many people might remove the benefits of the increase in personal allowance: but it will at least result in a higher pension in retirement.
What else happened in the UK?
We comment below on an upbeat forecast for world trade from the International Monetary Fund. It lifted its forecast for UK growth in 2018 to 1.6% – with the inevitable caveat about a possible trade war between the US and China. HSBC also predicted that the UK economy would grow at its fastest rate since 2011, but perhaps both of them should have paid more attention to the weather as the wettest Easter any of us can remember washed out the holiday and led to more tales of doom and gloom from retailers.
With a slowdown in the construction sector and the ‘Beast from the East’ in March, UK growth in the first quarter of the year was just 0.1% – the lowest figure since 2012. Nissan announced plans to cut hundreds of jobs in Sunderland as diesel sales declined, Carpetright announced the closure of 92 stores and TSB managed to add a new dimension to the words ‘bank chaos’ as it gave customers access to anyone’s account but their own.
There was some good news: wages finally climbed above inflation as the year-long squeeze on pay showed signs of ending earlier than expected, and unemployment fell to 4.2% – its lowest level since 1975.
The FT-SE 100 index of leading shares reacted to all the excitement positively: having ended March at 7,057 it is (as I write) up more than 6% at 7,520. The pound, however, has gone in the opposite direction and is down from $1.40 to $1.38.
Countdown to Brexit
With 11 months to go until the UK leaves the EU, it seems sensible to add a ‘countdown to Brexit’ section to the round-up. Throughout April the debate raged about whether the UK should stay in some sort of customs union with the EU after March next year. Doing so would avoid a ‘hard border’ between Northern Ireland and Eire – but would severely limit the UK’s ability to do trade deals with countries outside the EU. There is already a transition deal in place which will run until New Year’s Eve 2020: could we also see a similar transition deal for a customs union? I would not bet against it.
…And now we have the added complication of the Home Secretary’s resignation. Amber Rudd was a supporter of the customs union in Cabinet. It will be interesting to see who the Prime Minister chooses to replace her.
What happened in the rest of the world?
Clearly, we must start in Korea, with the historic meeting between North Korea’s Kim Jong-un and the South’s Moon Jae-in, resulting in an instant bromance and a commitment to rid the Korean peninsula of nuclear weapons. The meeting would have been unthinkable at the beginning of the year when North Korea was boasting of being able to reach the US mainland with its rockets: now Pyongyang says it will invite US observers to witness the shutdown of its nuclear site in May.
The news from Korea rather overshadowed the announcement that China’s economic growth in the first quarter of the year was a better-than-expected 6.8%. This came amid continuing threats of a trade war with the USA: you do suspect that if that happened there would only be one winner in the long term.
Assuming a trade war can be avoided the International Monetary Fund was in a bullish mood, predicting that 2018 will be the strongest year for global growth since 2011, as it forecast growth for this year and next year of 3.9%
Sadly the USA was well behind this figure, as growth in the first quarter of 2018 slowed to 2.3%. April was, however, a good month for both Alphabet (the parent company of Google) and Amazon as their sales and profits surged ahead. But it was a lot less fun for Facebook’s Mark Zuckerberg: he endured an uncomfortable month as he apologised for his company’s massive data breach at a Congressional hearing.
April was another volatile month for Bitcoin – probably the least surprising thing I will write this year – but for holders of the virtual currency at least it was volatile in the right direction. Having ended March hovering around $7,000, Bitcoin moved steadily upwards in April and (as I write) is trading at $9,236 (£6,714).
April was a good month for the ‘And finally’ section of the round-up – but we start with something that is probably best not read while you are eating breakfast.
NASA, America’s space agency has been looking for a material that can be transported into space and used for the spare parts that are inevitably needed on a long space mission. The idea is that the parts would be made using a 3D printer: but what material to use? The rocket scientists at NASA have decided that, well… human waste would be ideal. Transported into space and produced there: that’s an idea that Major Tom never discussed with ground control…
There had been widespread rumours of an exodus of London’s leading bankers after Brexit. Apparently, that is not now going to happen. A report in Politico said that the bankers’ wives have been to inspect Frankfurt – the rumoured new banking capital of Europe – and find it to be “dark, grey and dull.” So there you are: David Davis and Michel Barnier can huff and puff all they like – in the end, it looks like bankers’ wives will decide the shape of Brexit.
Sadly one wife who had rather less influence was the wife of Tanzanian gambler, Amani Stanley. So sure was Amani that his beloved Manchester City would clinch the Premier League title by beating Manchester United at home that he bet his wife on the result. All was looking good when City were leading 2-0 at half-time. Unfortunately United stormed back in the second half to win 3-2 and Amani lost his wife for a week to his United supporting friend Shilla Tony. As yet there is no news on her husband’s gambling from Mrs Stanley…