February 2023

2023 is well underway and Valentine's Day has come and gone, and the world seems to be moving fast. Some of the facts and figures noted below have moved quickly from our last notes even a month ago.

We all live busy lives, and each reader will have a 'highlight' of 2022, and perhaps the word 'highlight' might be exchanged for 'challenge(s)', because it was an eventful year. As you might anticipate, many financial thoughts will be UK focused; however, the world is now a small place and many of these economic factors are occurring globally, as we enter a new era of higher costs, inflation, interest rates and the like. The days of cheap borrowing for individuals and nations are over, certainly in the shorter term.

Each of the challenges and opportunities will have created learning points, either new for younger generations, or perhaps familiar for those of us at the other end of the age spectrum (see the 1970s and 1980s). But that does not lessen the difficulties that many have faced over the last year. There has been almost an element of being lulled into a false sense of security by the faux / artificially calm economic climate we have lived in since the last economic crisis. We have looked at some of the points in this Investment House View update, as we move into the middle of Q1 of 2023.

GBP / Sterling

The autumn of 2022 ushered in volatility with the US dollar, seeing a fall to just over $1.03 on 26 September. This has now stabilised and returned to a level of $1.21 at the time of writing (15 February 2023).

UK Gross Domestic Product (GDP)

It is noteworthy that net public sector debt has consistently run over the last year or so at approximately 97.4% of UK GDP (gross domestic product) (source: Office for Budget Responsibility (OBR) November 2022) and some will not want to see this level (and its associated interest costs) rise, although current forecasts indicate that this will peak at 106.7% in 2023/2024, before starting to fall.

Bank of England base rates

We had a base rate decision in December from the Bank of England (BoE), and it was a further increase, but not as significant as in recent times. The base interest rate has now reached 4.00% and may climb higher, although this is not guaranteed. For reference, the US Federal Reserve also increased its rate the night before by a similar amount. The BoE has now also talked widely about a shallow economic recession in the UK in 2023. There are grades of recession, so it might be mild-ish (see our blog regarding grades of recession), but still painful for many households. Indeed, when the statistics are collated and released, we may already be part way into recession.


This interest rate move is designed to reduce people's desire to borrow money, which they would spend, and so fuel inflation. We know that inflation (the CPI measure) reduced slightly to 10.1% in January 2023. The recent significant increases at this point seem to be being reversed, although perhaps at a slower rate than preferred, as they have in the US, although this is not a guarantee of future changes.

Understandably, some UK households dealt with soaring living costs and falling real wages by borrowing more on credit cards. The Bank of England reported at the end of November 2022 that individuals added an extra £1.2bn in credit card debt. In some instances, households are bridging the gap between incomes and ever-growing expenses with debt.

Markets factor in most things

Turning to the current market position, many individuals may refer to the value of their pension or ISA arrangements. We all know that the value of funds can fall as well as rise, and we have seen some significant volatility this year. Volatility is not uncommon, and this can be triggered by events such as war, as sadly we have seen in Ukraine.

The key point here is that if we think something is happening (such as an approaching recession), the markets have usually factored in the effects. Looking at the markets on 15 February, in comparison to a year ago, we find the following:


Position now / 15 February 2023

15 February 2022

+/- (Approx)





FTSE All Share




Dow Jones (US)




CAC 40 (France)




Dax 30 (Germany)




Market values can fall as well as rise and this is only a snapshot in time. However, what might this indicate? As you can see, we are not alone in having economic headwinds, with some faring better than others. Also, that any recession might be 18 months or so in duration, but perhaps not deep. So, potentially miserable for a year or so, but we believe not catastrophic, unless things change again.

Be ready for 2023 and beyond

Checking and reviewing all your financial arrangements is always recommended, but perhaps this winter, more than ever. The Bank of England is suggesting that the coming economic environment will last 18 months or so, and therefore being ready at the start is likely to be a far better position than addressing any financial issues at hand later.

Thirty years ago, Her Majesty The Queen referred to 1992 as her 'Annus Horribilis'. For many of us, 2022 has been the same. Which means that perhaps things can only get better.

I look forward to 2023 and all it offers.

Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner

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