The Growth Plan (that wasn’t) of 2022

20 September 2023

We have nearly reached the halfway point of the current financial year 2023/2024, and it seems a lifetime ago since the then Chancellor of the Exchequer of this time in 2022, Kwasi Kwarteng MP, delivered a Ministerial Statement entitled "The Growth Plan" to the House of Commons on 23 September 2022. This 'mini budget', as it was widely referred to, contained a set of economic policies and tax cuts, and was proposed to generate growth within the UK.

You will remember from summer 2022 that there was much political turmoil in the country, and with an internal election completed, Liz Truss MP took control of the Prime Ministerial post in the UK and appointed her new Chancellor.

Many will remember that some markets did not take kindly to the new proposals and following widespread negative response to the mini budget, some of the proposed policies and tax cuts were reversed within days.

Confidence in the UK's gilt and bond markets fell sharply. These sectors, which should be at the lower end of the risk scale, saw significant volatility. It was subsequently widely reported that the cost to the UK following the proposals, which were eventually all largely reversed, was around £30bn (Source: Resolution Foundation).As history will record, the selection of Liz Truss as PM was not popular, and her resignation followed on 20 October with the subsequent election of Rishi Sunak MP to the role. Mr Sunak's new Chancellor, Jeremy Hunt MP, then deployed his own plan, which had a largely stabilising effect on many UK markets.

This market volatility was unwelcome, and certainly saw sectors such as UK gilts and corporate bonds, along with UK smaller companies, taking significant downturns around the same time, with some yet to recover at the time of writing (September 2023).

It has also been suggested that the September 2022 mini budget was the start of the increase in inflation and, as we have seen correspondingly, the increase in Bank of England base rates.We do not believe this to be the case; all it did was to highlight and possibly speed the increase in inflation, which then peaked, and is now reducing but still stubbornly high. Bank of England base rates have now reached 5.25%, with an expected increase to follow later in September 2023 (not guaranteed).

These global economic pressures are shared across the world, and many developed economies are seeing sustained problems with inflation and its effects as an economic transition occurs from the last decade or so.

It is important that you keep your investment and pension planning under review, to ensure that the underlying investments meet with your attitude to investment risk.In the longer term, the fundamentals of investment risk have not changed; however, the recent past demonstrates how volatility can affect even the lower end of the investment risk scale.

2023 has proved to be volatile so far, although perhaps less so than 2022, and it is important to remember that investment and pension planning is for the longer term, rather than the shorter term.

If you would like to review your existing arrangements, then please do not hesitate to let the team at Chapters Financial in Guildford know.

No individual advice is provided during the course of this blog.

Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

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