The Chancellor stated that the recent budget was for “the makers, the doers and the savers”. The thrust was to stimulate business, reward those in work and allowing those who have saved into pensions to access their funds more flexibly, and if you have any surplus money, save into enhanced ISA’s. However, what about the rest of the country, those not nearing retirement, the unemployed, the younger population, and the families “just getting by” with more years ahead of low wages and real declines in purchasing power. It appears that this pre-election carrot dangling was to win over the growing amount of baby boomer silver haired voters, those with surplus savings and not those who are having their retirement age pushed up and up.
The choices – be lucky that you can retire shortly after April 2015 and blow your whole pension pot and gamble your money at Bingo whilst supping a pint or, make do with the continued austerity and save into a pension where the chances of retirement seem ever further away.
In the last month or so I have attended various events where the subject of the UK economy has been a major topic. It is clear that the perception or otherwise of a slowly recovering UK economy is dependent on whether you are being targeted as a voter or a business, especially an SME company. Five years of record low Bank of England base rate however has left savers out of pocket against inflation but borrowers getting better deals. The problem for businesses who have been surviving with low interest rates is what happens when they rise, even by small increments.
The public perception, being generated by politicians and those picking the most apt economic statistics, suggest the worst is over and growth is picking up, unemployment falling and house prices booming. It is however questionable whether fuelling the economy with “help to buy” for new and other property values of £600k actually helps the banks to lend more. It also allows buy to let landlords cash-in but hopefully stimulates more movement in the property market for first time buyers and those who have held back on moving recently. The warning signs are that possibly interest rates will rise earlier, that has an impact on mortgage rates and repayments and that year after year there are significant increases in utility, food and fuel costs that outstrip increases in wages, let alone the inflationary impact.
From a business perspective the view of how government and the banks are helping business is somewhat different. The larger corporate businesses have survived in the main and retrenched by holding cash rather than borrowing, investing or acquiring companies, but this may change. The SME companies however are still finding it hard to get appropriate and cost effective funding from the banks with some not wishing to be rejected with the additional information and forecasts being demanded as part of the loan negotiations. Potentially rising interest rates, consistently high business rates and rents are being pushed upwards. One of the costs that will impact a vast number of smaller businesses in the next year is auto enrolment for pensions with all the associated costs and administrative burden being with the companies.
It is not all doom and gloom but it does look that the recovery of the economy is going to be over a number of years, and certainly after the next UK election, due in 2015.