As many of our clients know, we send out occasional updates whenever there are significant events. We know there are times when our clients like to be updated and when they want some fundamental questions answering: ‘what’s happening, and what does it mean for my savings and investments?’

As you will see from the title, this one is on Brexit. It has been, by some distance, the most difficult update we have ever written. We are starting it on Thursday morning, September 12^th and have no doubt at all that by the time it ‘goes to press’ it will have been revised several times as events change. It is not so much hitting a moving target as hitting several moving targets. In the dark…

Nevertheless, we appreciate that our clients may have genuine concerns and it is our job to address those concerns. So let us try and answer the important questions: what has happened, what is likely to happen and what will it mean for your savings and investments?

The History

On the 23^rd June 2016 – approximately 1,180 days ago – the UK voted to leave the European Union. The margin was 52% to 48% and, after David Cameron’s resignation, Theresa May became Prime Minister and famously declared that “Brexit means Brexit.”

Countless trips to Brussels and three failed attempts to get her Withdrawal Agreement through the Commons later, Theresa May stood down and Boris Johnson became Prime Minister on July 24^th this year. Johnson has repeatedly said that the UK will leave the EU, “do or die,” on October 31^st – the latest date agreed with the EU after several delays to the original leaving date of March 29^th.

So far, Boris Johnson’s Premiership has been beset by problems. He has lost his parliamentary majority following the withdrawal of the Conservative whip from 21 rebel MPs, and been defeated several times in the Commons. There, MPs have passed a bill – dubbed by Johnson the ‘Surrender Bill’ – to take a ‘no deal’ Brexit off the table. Johnson and his chief of staff, the controversial Dominic Cummings, seem unworried by this and continue to insist that leaving the EU without a deal remains a possibility.

Meanwhile, the Prime Minister has prorogued (shut down) Parliament in readiness for an October Queen’s Speech. This decision was challenged in the courts last week and the Scottish Court of Sessions has declared his prorogation of Parliament illegal, although this will be tested in the UK Supreme Court in the coming week.

To describe the current situation as chaotic is one of the year’s great understatements. Neither did it become any clearer over the weekend as David Cameron – albeit with a book to sell – tore into Johnson and Michael Gove, and the Liberal Democrats promised that if they won an election they would simply ignore the Referendum result and revoke Article 50.

So – with a little over 40 days to go until the UK is scheduled to leave the EU – let us try and pick our way through the chaos and answer those questions we think our clients would like answering.

Is the UK likely to leave the EU on October 31^st?

In the Conservative leadership campaign, Boris Johnson consistently stressed that the UK would leave the EU on October 31^st. Despite parliament voting to take the option of no deal off the table and also passing a bill requiring that he ask the EU to extend the date, he remains adamant that he will not seek an extension. “I would rather be dead in a ditch,” has been his much-quoted response.

This morning (Monday) sees Boris Johnson fly off for a working lunch with European Commission President Jean-Claude Juncker, with both the Telegraph and the Express reporting that the PM is ‘confident he is closing on a deal.’ He is also – according to the BBC – continuing to rule out an extension past October 31^st.

At first glance, this seems an impossible circle to square: even if Johnson were to do a deal with the EU, could he get it past parliament, where so many MPs are opposed not just to ‘no deal’ but to Brexit itself. And could he satisfy the ‘Spartans’ in his own party? There are supposedly 21 right-wing MPs so fiercely opposed to any deal that he risks losing MPs from both wings of the Conservative party.

The most likely outcome in our view is that the Prime Minister will bring a deal back to parliament. This will be the result of serious horse-trading and late night negotiations at the European Council meeting on 17-18^th October. Bringing it back to parliament will result in more of the same – by which time the current provisions are that the PM (or possibly someone else mandated by parliament) must ask the EU for an extension.

Are we likely to have a General Election?

Boris Johnson, having stood on the steps of Downing Street and declared that ‘the last thing anyone wants is a General Election,’ would like a General Election. Jeremy Corbyn, having demanded one all year, desperately does not want one.

The reason is the same in both cases: all the polls currently suggest that the Conservatives would win and that Labour would lose a lot of seats – especially if the Conservatives entered into an electoral pact with The Brexit Party (TBP).

Last week, parliament voted against holding a General Election – and under the Fixed Term Parliament Act the next one is not due until 2022. However, the odds quoted by the bookmakers and betting exchanges currently suggest that we are likely to have an Election this year, in either November or December. That would indicate a deal with the EU, a small extension to Brexit and a hopeful Boris Johnson going to the polls a few weeks before Christmas, with any potential deal with TBP very much depending on the terms on which the UK left the EU.

Is Parliament likely to be recalled?

This is perhaps an easier question to answer: almost certainly not. The Labour Party Conference begins on September 21^st, the Conservative Conference eight days later and the Queen’s Speech – opening the next parliamentary session – is scheduled for Monday 14^th October. Having prorogued parliament, the Prime Minister will see little need to recall it and face another barrage of ‘unhelpful’ votes. So over the next three to four weeks, he will continue to shuttle backwards and forwards to Europe, hope that he can hold his own party together – and wait to see if the Machiavellian Dominic Cummings pulls a procedural rabbit out of the hat should negotiations with Europe break down.

How is the UK economy performing while all this is going on?

It is generally felt that the possibility of a no deal Brexit is ‘priced into’ the UK stock market. As we are writing, the FTSE 100 index of leading shares is standing at 7,348 having started the year at 6,728 and ended August at 7,207.

Very clearly, there are plenty of things that influence the stock market other than the Brexit negotiations: the US/China trade dispute is an obvious example. But the FTSE is clearly not in freefall: a rise of 9% since the beginning of the year represents a more than acceptable performance.

The pound is currently trading at $1.25 – which is down slightly on the $1.27 at which it started the year. Against the euro it is trading at €1.13, having risen over the last month as the European Central Bank has re-started quantitative easing to try and boost the eurozone economy.

The UK economy’s glass is half full or half-empty, depending on how you choose to look at it. Unemployment is down to its lowest level for 45 years, there are 300,000 more people in work than a year ago and wage growth is strong. Against that, the high street continues to be in trouble, confidence is low in the service sector and factory output has fallen at its fastest rate since 2012.

So there is good news and bad news – but the UK is doing a good deal better than many of its major competitors.

What will all the events – and the likely outcomes – mean for my savings & investments?

Traditionally, the one thing stock markets value above all else is certainty. The one thing Brexit definitely does not deliver is certainty. But, as we have seen above, the UK stock market is having a good year: around the world other major markets are also up. Germany and the US were up by 13% to the end of August, the Chinese market by 16%.

So the reality is at odds with the often gloomy news headlines. As George Osborne was fond of remarking when he presented his Budgets, external factors have as much influence on the UK economy as events at home.

Saving and investment – as we repeatedly stress – is a long-term commitment, and Brexit does now appear to be nearing the end-game. There is plenty to be optimistic about in the UK and, in or out of the European Union, that will not change.

Neither will our commitment to our clients: rest assured that whatever happens, we will be here to answer your questions and keep you updated on current events that may affect you, your savings and your investments.

As Harold Macmillan famously remarked, “Events, dear boy, events.” There will always be ‘events’ for us all to deal with – even when Brexit is a distant memory.

With autumn pushing the heat of summer south across the equator, it’s time to strap on your wellies and get ready to kick through piles of fiery leaves. So to celebrate the change of season, here’s our list of places you should visit to make the most of the stunning autumn colours. 

Isle of Lewis, Hebrides

Autumn arrives early in the Outer Hebrides. The trees and fauna on the Isle of Lewis take on a fiery glow into September and October. The 270 acres of woods surrounding Lews Castle becomes something to behold. There are a whole host of walks for an intrepid hiker to choose from. 

Loch Lomond, West Dunbartonshire

The largest inland stretch of water in the UK by surface area, Loch Lomond is the centrepiece of Loch Lomond & The Trossachs National Park. The second bonus from journeying to the area comes from the vast wooded glens that make up Great Trossachs National Nature Reserve. The Millennium Forest Trail is not a walk that should be missed, providing brilliant views of the loch and the surrounding woodland.    

Forest of Dean, Gloucestershire 

Ancient woodlands steeped in history and cultural heritage stemming back to the Iron Ages. The forest was then used by Anglo-Saxon kings as a royal hunting ground. There’s a huge range of activities to take part in during the autumn months, ranging from exhilarating zip wires to biking and sculpture trails. You can find out more here. 

New Forest, Hampshire

The treescapes of Wiltshire and Hampshire have been a place of autumnal brilliance for centuries. There are over 219 square miles of protected space, hosting oaks up to 800 years old and elderly beeches of 400 years or more. The New Forest Walking Festival takes place from the 13th of October until the 28th and is just one of the many outdoor pursuits you can get involved with during a visit. 

Rydal, Cumbria

Rydal is an area full of nostalgic ambience echoed in its literary history. The area has been the subject of many poems and stories and for almost 40 years Rydal Mount was home to the famous poet, William Wordsworth. Dora’s field is one of the bittersweet sights of the area, a field filled with hundred of daffodils between Rydal Mount and the main road, planted by Wordsworth following the death of his daughter. 

In the autumn, expect stunning misty mornings across the water that will make you feel like you’ve stepped into a poem. Rydal acts as a great jumping off point for exploring the rest of the Lake District and is worth a visit any time of year, let alone in the autumn. 

Blenheim Palace, Oxfordshire

The 2000 acre park that surrounds the Baroque palace holds some of the most beautiful landscaped gardens in the country. In autumn, Blenheim hosts a series of seasonal events that you can find out more about here. There is a fantastic maze on site, buggy rides, fishing and even outdoor film screenings and concerts. The palace also plays host to art exhibitions and has hosted works by Andy Warhol alongside its own collection of historic British art. 

Guernsey, Channel Islands

The second largest Channel Island is a naturist’s wonderland. Covered in leafy enclaves and coastal rock faces to die for, there’s something for every nature lover out there. The Candie Gardens in St Peter Port is a must visit if you visit the island. There’s also a walking festival from the 15th until the 30th of September for those of you who love a good wander through beautiful coastal scenery. 

Stourhead, Wiltshire

Stourhead is a National Trust site, known for its stunning display of autumn colours. The house itself is a splendid visit, with its majestic stately rooms full of exquisite furnishings and historic art. The range of exotic trees will surely delight any visitors, especially when the North American maples turn scarlet red over the course of the season. 

There’s even a small cottage nestled amongst the trees in the garden where you can warm yourself by the fire with a nice cup of tea. 

Changes to  IR35 legislation are coming into effect in April 2020. IR35 legislation is designed to target “disguised employment” between firms and freelancers. This is where a company hires freelancers and contractors to undertake work, yet they are effectively employees of the company. It also affects freelancers who operate as sole traders or limited companies. The change in 2020 shifts the onus onto employers in relation to proving the contractor’s self-employed status. 

Who will be hit the most by the changes? 

Many industries rely heavily on freelance workers. The trade off is simple – the more freelancers operating in a sector, the heavier the effect. In a document published in 2018, HMRC predicted that 90% of freelancers who fall within IR35 are not complying with the existing IR35 rules. It’s clear that from April 2020, private sector businesses will need to do more to comply with the legislation.

What are the critics saying?

The general view is that the reforms will increase burdens and costs on businesses during a time of uncertainty and change, whilst also having to comply with many other acts of legislation that are evolving in all areas. 

The fact that HMRC have lost a number of tax tribunal cases surrounding IR35 also illustrates the point that there is a possibility for different conclusions to be reached on the same facts and for tribunals to even take opposing views against HMRC. 

So, as we can see, the influences of IR35 are not quite as definitive as HMRC would like. 

How can a firm protect themselves? 

HMRC has a tool named CEST that determines whether an individual should be classed as employed or self-employed for tax purposes although concerns have been raised around the tool due to its rate of accuracy. HMRC says that the tool arrives to a conclusion 85% of the time, leaving 15% of cases pending further investigation. 

There has even been debate between HMRC and professionals around the validity of those percentages. This is further highlighted by a number of high profile cases involving television hosts and broadcasters that have gone against HMRC. 

Here are a few extra tips to make sure your firm is compliant:

• Develop a robust process for recording the use of freelancers centrally. 
• Determine how those contracts are being carried out. 
• Use CEST as a starting point. CEST can be very black and white, however, so it’s best to also develop a back-up process. 
• Identify who IR35 will apply to and make sure they’re trained to comply. 
• Monitor each freelancer’s status and re-run status determinations periodically (every 6 months is a good rule of thumb). 
• Ensure that there is an appropriately drafted contract for each engagement which reflects the working arrangements and status determination. This will give the business the right to deduct PAYE and employer NICs from the fees if required. 
• Decide which freelancers are critical to the business and for whom the business is prepared to pay extra due to IR35. 
• Consider looking into business processes to determine if any changes are required. 

With over 1.4 million British freelancers working across all sectors, IR35 is set to affect many working relationships all over the country. Making sure your firm is compliant with the changing legislation is critical to avoiding any HMRC investigations.

A new report by Scottish Widows (SW) has found that savings habits among younger people are rather lacking when compared with older generations. 

14% of people aged 20-29 are not saving any money, whereas 20% are saving between 0-6% of their wages and 26% are saving between 6-12%. That leaves only 40% of people between the ages of 20 and 29 making what SW deems to be ‘adequate’ savings (12% and upwards). 

The figures differ for those over 30 where 59% of savers are saving adequately. 

Scottish Widows outlines that the central problem with savings in the UK is that people simply aren’t saving enough. This could be attributed to the decline in defined benefit pension schemes and wider economic challenges. Though progress has been made, with record highs in the adequate savings category, according to SW, this is still not enough. 

The lower level of savings among younger people is likely to be a reflection of differences in priorities. SW’s study found that 45% of younger savers (under 30s), the highest of any age group, are saving towards medium-term goals such as buying a house. 27% were found to be saving for the long term and 28% were saving for rainy days. 

SW notes that the savings gap for young people “is perhaps unsurprising but nonetheless worrying.” Those under 30 are at a time where long-term saving can be hardest, yet investment growth can be advantageous. SW outlines how younger people are missing out on “the power of compound growth.“ 

They later go on to present four interlocking issues that have led to this general lack of savings made by younger generations:

• Most people remain disengaged with long-term savings – 38% of people are not aware how much they are saving 
• Financial pressures – 28% of individuals earning between £10,000 – £20,000 say they’re not saving at all
• Self-employed individuals are being left behind – 41% of the self-employed aren’t saving at all
• Home ownership is a struggle for young people – 56% of 20-29 year olds say they have not saved for a deposit

Scottish Widows then set out a number of reforms that would benefit savers: 

1. Raise pension contribution rates – a new level of 15% to give people a chance to maintain their quality of life during retirement
2. More flexibility between pensions and property – including the ability to use some retirement savings to help with the purchase of their first property
3. Create better education and guidance – which includes information on the role of property and pensions in retirement
4. Provide a hardship facility – allowing some savings to be used to avoid problem debt
5. Ensure the self-employed have access to similar benefits as those in employment

Though there are marked improvements from last year’s report, it seems there is still a long way to go in terms of saving habits in younger individuals. As suggested above, there may even be a requirement for governmental reform in order to achieve the goals that Scottish Widows have set out.

For advice on how to develop savings plans to stand the test of time, don’t hesitate to get in touch.