13 December 2024
general
You might be used to reflecting on your personal and professional accomplishments at the end of the year, assessing what went well and what lessons you can take with you into the new year.
But what could you learn from some of the news stories of the year? After all, headlines and reports often shape your impression of the financial landscape in the UK, sometimes directly affecting the decisions you make about your own money.
2024 was an eventful year, with more elections taking place across the world than in any other year in history. This meant that uncertainty was high at the beginning of the year. It’s another reason to reflect on the events that occurred and find the lessons that you can take with you into 2025 to help you manage your money well.
Read on to discover some of the helpful lessons you could take from the top financial stories of 2024.
1. “What goes up, must come down”
In 2021 and 2022, inflation rose rapidly here in the UK, and the Office for National Statistics (ONS) reports that it reached a peak of 11.1% in October 2022.
In response, the Bank of England (BOE) increased the base rate steadily throughout 2022 and most of 2023 with the aim of bringing inflation back to its target of 2%. The rate rose from 0.1% in December 2021 to 5.25% in August 2023, where it remained until August 2024. This naturally had an influence on interest rates for consumers, from mortgage rates to savings rates.
Fortunately, inflation began to fall. In August, the Consumer Prices Index (CPI) rose by 2.2%; as a result, the BoE was able to begin cutting interest rates.
There’s still more work to be done, but for now, it seems that prices are rising at a much more manageable rate – the ONS reported that the CPI rose by 2.3% year-on-year in October 2024, up from 1.7% in September. Though this does mean lower interest rates for savers, borrowing money such as for a mortgage is likely to become more affordable as interest rates fall.
The base rate rise was undoubtedly painful for many and its impact will continue to be felt for some time while rates stabilise. But as the rate begins to fall, it’s a helpful reminder that in the world of finance, change really is the only constant.
2. “Don’t count your chickens before they’ve hatched”
In the lead-up to the new Labour government's first Budget, rumours and speculation about what might be included was rife. Many expected changes to pensions and tax legislation, in particular Inheritance Tax (IHT), and began to adjust their finances based on the predictions that were flying around at the time.
interactive investor reports that in September, investors removed £2.4 billion of equities from funds in anticipation of changes to Capital Gains Tax, a marked increase to the outflows of £424 million seen in August.
Additionally, FTAdviser reports that rumours of changes to the Lump Sum Allowance led to many clients requesting withdrawals from their pension, only to invoke their cancellation rights when the predicted changes didn’t materialise.
Though there were some significant changes announced in the Budget, many of the rumours didn’t turn out to be true. As with most things in life, it’s usually sensible to wait until you have all the facts before making changes to your portfolio or financial plan. Doing so ensures you can make the most informed choices for you, that enable you to make progress towards your long-term goals.
3. “One swallow does not a summer make”
At the end of 2023, the UK fell into a brief recession, as economic growth contracted for two consecutive quarters. This led economists to predict that the UK would experience a recession during 2024 as well. In January, the Guardian reported that the economy was forecast to contract by 0.1% across 2024.
Fortunately, the economy seems to have avoided this fate so far this year. The ONS reports that Gross Domestic Product (GDP) grew by 0.1% in Q3, following growth of 0.5% in Q2. Real GDP growth was recorded at 1% in Q3 compared to the same period in 2023.
These figures are reassuring after the predictions of recession and provide a welcome reminder that taking a long-term view of economic growth is more helpful than focusing on individual months or quarters. For example, though Q3 saw GDP rise, data showed that the economy contracted in September. A BBC report attributes this to uncertainty related to the approaching Budget.
When figures dip over the short term, whether that’s economic growth or stock market returns, it can be nerve-wracking. But remember that one disappointing month doesn’t necessarily mean that the progress made in previous months and quarters is undone. There are a range of factors that affect economic growth, so try to tune out the noise and focus on the long-term figures that provide a more helpful picture.
Get in touch
If you’d like to learn more about how we can help you manage your wealth no matter what might happen in 2025 and beyond, please get in touch. Email enquiries@jesellars.co.uk or call 01934 875 919.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning or tax planning.
