As you head towards the end of the year, and start looking forward to 2025, it can be helpful to take some time to look back at the financial challenges and key events that shaped 2024.
Some of these challenges were expected, while others came very much out of left field.
Regardless of their origin, it’s useful to review them as they could have a bearing on your current financial health, as well as help inform any steps you might want to take as you move into a new year.
Take a look back at some of the events of 2024, and what we might expect moving forward.
Both inflation and interest rates were on a downward trajectory for most of 2024
As is usually the case, inflation and interest rates were the two key economic indicators at the heart of the UK financial landscape throughout 2024.
With a government mandate to keep inflation at 2%, the Bank of England (BoE) still sees interest rates as the most effective weapon to control rising prices.
As you can see from the two charts, throughout most of 2024 the Bank has been successful in its aim, with inflation falling from 4% to 1.7% in September. This resulted in the first cut in the BoE base rate since rates were cut to 0.1% during the pandemic, followed by a further cut to 4.75% in November.
Source: Statista
Source: Trading Economics
This is clearly good news for both consumers and borrowers, although the most recent uptick in the rate of inflation could mean interest rates staying higher than expected.
However, it has taken time for the reduction in inflation to filter through to interest rates, which means that if you are on a fixed mortgage rate that is ending shortly, you may want to think about shopping around for a decent rate.
There is little consensus around future interest rate changes. For example, This is Money reports that Santander believes a BoE rate of 3.75% by the end of 2025 likely, whereas Zoopla believe rates will settle in the 4-4.5% range throughout next year.
The Bank of England themselves believe that inflation is likely to edge up to about 2.75% the second half of next year before falling again.
A new Labour government came into power with a substantial majority
The biggest event in the UK calendar in 2024 was almost certainly the general election held on 4 July.
The wave of anti-incumbency sentiment that had affected a series of governments around the world resulted in the Conservative party suffering their worst ever election result, and going into opposition for the first time since 2010.
With the new Labour government enjoying a majority of over 170 seats, it’s safe to say they’ll be in power for at least the next four years.
The new government pledged to fill a £22 billion “black hole” left by the previous government, as well as increase public spending on health and education to repair public services.
This meant that their first Budget on 30 October resulted in a range of measures being announced that are likely to have an effect on your financial planning. These included:
- An increase in the rate of Capital Gains Tax payable on your investment profits from April 2025
- Confirmation that, from April 2027, your pension funds will now form part of your estate for Inheritance Tax purposes
- An end to the freeze on Income Tax thresholds in 2028.
If you haven’t already considered how these changes could affect you, we would strongly recommend you speak to your Financial Adviser.
Find out more: How the recent UK Budget could affect your financial planning if you’re an Australian living in the UK – bdhSterling
The re-election of President Trump could see tariffs on UK exports
Despite falling inflation and record stock market levels, the wave of anti-incumbency swept away the Democrats in the US. This not only returned Donald Trump to the White House, after his defeat in 2020, but also gave the Republican party control of both houses of Congress.
As we are still in the interim period before the new administration takes power at the end of January, it’s difficult to comment with any certainty on their policies.
However, both during and after the election campaign, Donald Trump has talked extensively about the use of tariffs on imports into the US as a key economic weapon.
The US is the biggest trading partner of the UK, with government figures showing over £188 billion of exports in the year up to the end of Q2 in 2024.
Any tariffs on UK exports will likely make them more expensive and could result in an increase in UK inflation.
If this were to happen, BoE may well be forced to raise interest rates again.
Markets have remained buoyant throughout the year
Despite economic uncertainty, elections, and geopolitical tensions, there’s no doubt that 2024 has been an excellent year on financial markets, and you are likely to have seen this reflected in the value of your investment portfolio.
As you can see, various different market indices have all shown healthy growth since the start of the year.
The only exception has been the French market, which has gone down in the wake of internal upheaval and political uncertainty.
Source: Google Finance
As we get closer to 2025, the financial landscape continues to be shaped by a mix of challenges and opportunities.
For example, a combination of rising inflation, high interest rates, and the ongoing conflicts in Ukraine and the Middle East could eventually result in the current bull market coming to an end.
However, with so much uncertainty, there is no unanimity on how markets and economies will fare.
If you have any concerns as to how future market fluctuation could affect your financial plans, you should speak to your Financial Adviser.
Get in touch
If you would like to talk about any of the issues raised here, please get in touch with us.
Please note
The value of your investment 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.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.
