Will the “Northern Powerhouse” Still go Ahead?

The “Northern Powerhouse” initiative – a set of government plans to drive investment and development in Northern cities and increase the role they play in the UK’s economy – has lately been painting a bright future for the North of England. However, with a new Prime Minister in charge and the champion of the initiative, George Osborne (pictured right), departing from his role as Chancellor, many people are asking what is going to become of this initiative.

In particular, this is likely to be a question on the lips of many people who have invested in Northern cities such as Manchester and Liverpool. For a lot of investors, particularly property investors, the promise of growth as a result of the Northern Powerhouse scheme was a key factor in the decision to place their funds into Northern markets. As such, some must now be wondering whether there is a good chance their investments will still perform as previously expected, while others may be asking whether it is still worth considering the North of England as an investment destination.

While Osborne may be out, the government does not seem to have forgotten the initiative, much less abandoned it. On the contrary, Prime Minister Theresa May has appointed a new Northern Powerhouse minister in the form of Andrew Percy, MP for Brigg and Goole, and a spokesperson for the government stated that the initiative would “continue to be a priority” under the country’s new, restructured leadership.

Figures within the region seem confident that the plans will go ahead relatively unhindered following the loss of Osborne. Indeed, speaking the BBC the leader of Sheffield City Council, the Labour Party’s Julie Dore, said that the city was “not going to miss George Osborne’s personal leadership on the Northern Powerhouse.”

Dore went on to state that the essence of the initiative had already been in place for some time, with “council leaders… working on this idea long before [Osborne] came up with the slogan.” North East Institute of Directors chair Graham Robb also described Osborne’s “Powerhouse” as a slogan, albeit one that “had a big impact, especially with businesses buying into it.”

Over the past two years, the North of England has seen a drop in unemployment of 127,000 and a doubling of international investment. According to Irwin Mitchell, however, only Liverpool and Manchester have made it into the country’s top ten fastest-growing cities so far.

The impact of the referendum on the Powehouse initiative and the wisdom of UK property investment in general remain uncertain. Some experts have tentatively suggested, however, that the government’s ambitious plans for the North may put it in a better position to weather any storms, and that property is likely to remain one of the better UK assets to invest in long-term.

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Capital Gains Tax: How to Legally Pay Less

Capital gains is one of the key taxes investors face. On many assets, including properties and stocks and shares, it is levied on the profit made at the point of sale compared to the purchase price. There are, however, several legal and legitimate strategies you can use to reduce your overall bill. These include:

Personal Allowances

The first thing that reduces everyone’s tax bill, automatically, is of course the personal allowance. The chances are this is all used up already, but does your partner have any personal allowance to spare? If so, then handing some of your assets over to them will be an effective way of avoiding tax. Of course, this does not mean just taking their unused personal allowance for yourself but rather handing the assets over into their ownership. Even so, collectively this will leave the two of you with the same gross income and a smaller capital gains bill.

Negligible Value

If you hold any other assets that have declined in value to the point that their worth is almost non-existent, you may be able to make a negligible value claim and this could potentially be a net tax benefit. This kind of claim essentially means declaring an asset worthless and, if HMRC agrees that its value is negligible, it will be treated as if you sold that asset for £0 (this being its current market value) and then repurchased it at the same rate. This gives you a recordable loss to offset against your capital gains bill, yet does not involve actually parting with ownership of the asset which you may hope will gain value again in the future. The loss may be recorded in the tax year you made the claim, or it may be recorded in any of the previous two tax years as long as HMRC agrees that the asset had already become negligible in value at the time in question.

Repurchasing (the Legal Way)

There was once a practice, now understandably banned, of selling assets that had appreciated in value, usually stocks and shares, and almost immediately repurchasing them for virtually the same price. This effectively secured a higher purchase price for tax purposes, reducing capital gains when the asset was sold for real. This practice, known as “bed and breakfasting,” is now illegal, but a related practice which has come to be known as “bed and spousing” remains an option at time of writing, albeit less powerful than it has been in the past. This involves selling stocks or shares which are then repurchased by your partner. Like handing assets over to your spouse to use their personal allowance, this does not improve your own tax situation but rather provides income to your spouse who will gain benefits that you would not. In some cases, “bed and spousing” will result in a net benefit for your collective finances even if not for your personal tax bill.

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Property Investment: Beating the Tax Hikes

Last year saw a number of tax hikes unveiled which will hit the property investment sector. More recently, this year’s budget put significantly less focus on reigning in landlords, but still excluded them from a significant cut to Capital Gains Tax. The various changes are due to be rolled out out in the years leading up to 2020, and could seriously reduce the returns that some buy-to-let investments bring in and even make some outright unprofitable. There are some steps that can be taken to minimise the impact of these changes, however. Notably, landlords may want to consider the following:

Set Up a Company

Many of the tax changes which are likely to have the biggest impact are aimed at individual investor-landlords rather than at companies. As such, by setting up a limited company and investing through that you could effectively dodge much of the worst of the storm, and also gain more extensive rights for offsetting costs against rental income for tax purposes. You would also benefit from cuts to corporation tax, which is dropping to 19% next year and then to 18% in 2020. However, you should also be aware that the only way for rental income to be paid out into your own pocket is by receiving dividends as a director. As of next April, you will be entitled to £5,000 tax-free in this way, with the remainder being taxed at 7.5% for basic rate taxpayers and 32.5% for higher rate taxpayers. You should always be aware that having a limited company is more likely to require an accountant than holding your investments as an individual. While many landlords, especially higher-rate taxpayers, would be better off for forming a limited company, it is best to give the matter careful thought to be sure that it will be beneficial in your circumstances.

Switching Mortgage

This is not strictly a way to bypass the tax changes, but it could potentially be an important way to offset them and keep your profits as high as possible. If your mortgage has reached, or is approaching, the end of its initial period then the impact on your profits of paying higher interest rates could be significant. This will be further accentuated in coming years with the rollout of one of the key tax hikes, a reduction in mortgage rate relief, and with interest rates forecast to begin rising next year. As such, it may well prove very prudent to remortgage now while interest rates remain at their historic lows, securing yourself a low rate for a few years to come.

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Global Stock Markets Remain Unsteady

Volatility in the stock markets is continuing, with both worries over economic growth rates in key markets and the continued fall in oil prices contributing to uncertainty. US markets have showed gains, while European ones have fallen.

The FTSE 100, one of the key indexes measuring the performance of the London Stock Exchange, closed at a loss of 0.7%. Some markets on the continent have suffered more heavily. The primary Frankfurt index closed with a fall of 1.7%, and the main Paris index showed a drop of 1.8% at close.

Major US indexes, on the other hand, have uniformly shown gains. This is partly thanks to a noticeable pickup in the price of US crude oil, which briefly dipped below the US$30 per barrel mark recently but has now increased to US$31.03. The three main US share indexes showed gains varying between 1.4% and 2%.

The falls in European markets came after major selling activity in a number of key Asian markets, which also showed falls. At close, the Nikkei index showed a fall of 2.7% for Japan’s stock market. At one point, Japanese shares had been down by fully 4%, but they managed to recover some of these before the close. Meanwhile, the Hang Seng – the main index of Hong Kong shares – toyed with the lowest levels seen for two and a half years, before easing off somewhat to be down 0.6% when the market closed.

One of the few positives amongst the main Asian markets was the Shanghai Composite. Shanghai’s shares have been through a few months of tough trading conditions now, but they have just managed to pick up by almost 2% when so many other markets have been falling.

One of the key factors behind the volatility in so many global markets is the international oil price, which has fallen drastically since mid-2014. In many countries, oil represents a major section of industry and a vital part of the national economy, and the drop in prices has hit such countries hard. Many Middle Eastern oil-producing nations have suffered, and Russia has recently announced that it may have to revisit its most recent Budget on account of the impact. It is not just countries that are heavily reliant on oil and related taxes that have suffered, as this group contains many countries, some major international economic forces, and as such the ripples have been very widespread. Low oil prices are predicted to continue for some time, and the impact on stocks and shares around the world could be just as lasting.

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Why Niche Property Assets are on the Rise

Not so long ago, investing in property almost always involved standard, residential buy-to-lets or the core kinds of commercial property such as offices and retail units. However, the past few years have seen a number of niche assets rise to prominence. Student property is perhaps the star of this group, but automotive property, care homes, hotel rooms, and other specialist assets have also grown significantly in popularity. So why are investors moving away from the mainstream and towards these formerly very niche asset types? There are a couple of main reasons behind this shift.


Investment is, of course, a way to make money. As such, it’s not surprising that money is one of the key factors at the root of the shift towards more specialist investments. Some of them are simply performing very well, and this has served to get more attention from investors. Student properties, in particular, have been named by major consultancy Knight Frank as the single best-performing type of asset in the UK in recent years, amidst high demand from rising student numbers and short supply.

With the market already undersupplied and intake caps being abandoned, it may look like you can’t go wrong with student property in particular. This is certainly an idea that the companies selling the investments try to encourage. While many investors are finding their assets seem to back up this idea, if you invest in student property don’t skimp on due diligence. Despite short supply students are becoming more discerning. Developments that don’t have a particularly good location, in particular, are still more than capable of turning in a disappointing performance.


Once again, investment is essentially a way to make money. But there is, of course, one factor that prevents investors from just buying up all the assets which promise the very highest returns and that is risk. Many investors are pursuing niche property assets in the pursuit of one of the key ways to mitigate risk; diversity.

Many niche, specialist property assets do not follow the trends of the mainstream property market particularly closely. Demand for traditional buy-to-lets or commercial space is not particularly closely tied to student numbers, the tourist trade, or the demand for care homes to house the UK’s ageing population. This means that investors, especially those who have always specialised in property and don’t want to step outside of their comfort zones, can spread the risk by picking up these specialist assets. If their mainstream buy-to-lets are hit by falling values or reduced demand, niche property assets that are more-or-less independent of these trends could add important buoyancy.

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Property Investment: Why London Isn’t Paved With Gold

London is the heart of the UK economy, and one of the biggest economic centres in Europe if not the world. For this reason, property investors – both domestic and international – flock to the UK’s capital in droves, and prime London property is often talked about as if it’s the gold standard.

For wealthy owner-occupiers who want to be close to the action, this might be true. However, for those buying property as an investment, London is not as great as many people seem to think. While London is still the biggest draw, at least internationally, UK and overseas investors are increasingly heading to other regions instead. This is because London is flawed in two simple, surprisingly basic, yet very important ways:

It’s Expensive

London properties are expensive. In fact they are very expensive. So much so that the market is only even accessible to the wealthiest of individual investors. Even flats in London averaged at a cost of £456,323 last year according to online property portal Rightmove. In June last year, meanwhile, it was reported that the average residential property price (not just flats but houses too) for the UK excluding London and the surrounding South East region was less than half that – £201,000. For the majority of investors, price alone blocks London off entirely as an investment destination. Even if you can afford it, it means tying up a much larger sum in your property, and most likely taking on a considerably larger mortgage debt as well. If nothing else, this prevents the kind of diversification you could achieve from investing the same amount elsewhere.

It’s Not Profitable

It’s often assumed by those who can afford to invest in London that these higher prices will at least get a more profitable investment. After all, London is bursting with demand and is almost certainly the UK’s single biggest and most concentrated market. However, when you look at the figures, London is actually very disappointing in terms of yields – with the exception of some specific areas (and these are sometimes short-lived). High prices are not in proportion to rents or growth potential and are therefore compressing yields. Research by various companies and organisations regularly shows that, in terms of cold, hard returns, London underperforms compared to many of the UK’s other urban markets. Most recently, a report from HSBC has showed that London’s yields are decidedly lacklustre and fall below 3% in some areas, while alternative cities such as Manchester and Blackpool are approaching the 8% mark.

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Tips for a Diverse Portfolio

The old truism “don’t put all your eggs in one basket” is a key tenet of investment. All investment involves some degree of risk, so if one of your interests fails it is good to have other, unconnected interests to keep your portfolio afloat.

Even small portfolios can potentially be diversified. However, if you are relatively new to investing or have simply found diversity is something you have struggled with, a few tips and considerations can help you spread your interests and build a nice, diverse selection of investments.

Start with Cash

Remember that cash is also a form of investment. Indeed it is a very important form of investment. It is inherently the most liquid, and is certainly the safest and most stable. Obviously you will need at least some cash for spending, but it is definitely worth having a chunk of your portfolio in cash savings accounts beyond what you would need for meeting your financial needs. Think about how much you want to keep in cash first, and then subtract that from your portfolio before you start looking at other options.

Bonds: A Rule of Thumb

There are few if any hard-and-fast rules when it comes to investing, but there are a few rules of thumb. One rule of thumb which is often recommended relates to how much you’re your portfolio you should put into bonds. The concept is simple; as a minimum, put a percentage of your portfolio equal to your age minus 5 into bonds. As bonds are among the safer and more stable investments, this decreases your risk profile as you get older and are less likely to be comfortable with risking your life savings.

Diversity over Quantity

Diversity and quantity are two very different things. One could have many, many different investments and still not have a very diverse portfolio. The point of diversity is to provide you with security if one asset fails by ensuring you own different assets that are not failing. If you have many different investments but all are fairly similar, then this is not very diverse and it is more likely that all your assets will fall at the same time. For instance, if you have shares in companies across a range of sectors and have provided peer-to-peer loans to businesses, then all your interests are in businesses. Harsh trading conditions and a falling stock market are likely to impact on every one of your investments. On the other hand, if you have a mixture of shares, bonds and property – which bear little relation to one another – it is a lot less likely that any one market factor will impact all of these things equally.

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Investing in Gold: Hints and Tips for Beginners

Gold is a popular investment asset, and like many assets it has grown increasingly popular since the interest rates offered by banks headed towards the floor. Gold is considered a relatively stable asset which generally rises in value over time. It is usually not a short-term investment, but many investors have had good results using gold as a medium- or long-term investment and it has a millennia-long history of strong global demand.

However, every asset has its quirks and an element of risk. As with all investments, gold should be approached with care and careful consideration.

How to Invest

There is more than one way to invest in gold. Obviously, one is simply to buy gold. This will usually take the form of special gold bullion such as bars or coins from the royal mint. However, it can take the form of any sort of gold including jewellery, but bear in mind the value will be seriously affected by purity as the majority of jewellery is not pure, 24k gold.

The main alternative is to invest in gold mining companies or other companies that deal mainly in gold. These companies, and therefore their share values, will naturally be tied fairly closely to the price of gold so when the gold price goes up you can expect to benefit. Most of these companies also have interests in other diverse metals and possibly other areas entirely, adding some automatic diversity to your investment. However, this avenue is also vulnerable to other factors that might affect the success of the individual business.

Shop Around

Don’t think that the Royal Mint is the only place to buy bullion coins, for instance. They may be the producers of those coins, but there are other companies that purchase the bullion produced by the royal mint wholesale and sell it at discounted prices. The main thing is to ensure you are dealing with a respectable seller. Furthermore, this bullion can be picked up second hand, and the base value of this older gold is just the same as that of new gold.

If you want to try and pick up cheap gold through buying second hand, broken or scrap jewellery then there are countless places you may choose to look. However, make sure you check hallmarks properly and know you are paying a good price for the actual gold content of the item – which can be a labour-intensive process.

Beware the Pitfalls

Like any asset, gold has its pitfalls. It does not provide any liquid income while you still hold the investment, and it can be difficult to resell quickly. It can also be difficult to store, and if you invest in a reasonable quantity should not be kept at home as it will probably fall outside of your home insurance.

It is also easy for beginners to get caught out by the many products which are barely more than scams. Ebay, in particular, is a minefield of questionable sellers peddling these kinds of products. They look like legitimate gold bars or coins and are sold as investment products, but are only gold plated and are almost worthless. To avoid breaking the law the seller will mention this, but they will avoid saying “plated” and instead use obscure or invented synonyms such as “layered with gold” to try and hide the fact and trap unwary investors into thinking they are buying something more worthwhile.

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Types of Investment to Avoid

There are countless opportunities for investment out there. The adventurous investor can have a lot of options to choose from, especially if they have decided after careful consideration that they are happy with a degree of risk. There is nothing inherently wrong with riskier investments as long as they have been carefully considered (preferably with the aid of independent advice). However, there are certain types of investment that are generally best avoided by even daring investors.

Unregulated Collective Investment Schemes (UCIS)

Investment funds, in which your money is handled by an expert along with that of many other investors, can be a great way to invest. They usually benefit from regulation by the Financial Conduct Authority (FCA), which is good news for investors. If something goes seriously wrong, you will have a degree of protection.

Unregulated Collective Investment Schemes (UCIS) are a form of fund that lacks this protection and is not regulated by the FCA at all. As a result, these investments are not only high-risk with little protection, but also a minefield. Most make spurious promises about high returns, often underplaying the risks, and there is heavy emphasis on unstable investments such as film production and forestry. Some are out-and-out scams. If you are conned or missold a product, you will not be able to complain in any official way, let alone reclaim your money.

Traded Life Policy Investments

Traded Life Policy Investments are also known by the grim-sounding nickname of “death bonds.” Your funds are invested in the life assurance policy of one or more individuals, usually based in the US, and the bond holds the right to a payout when that individual dies. The investment performs better if the person dies sooner.

Some investors may feel uncomfortable at the very thought of holding an investment that is dependent on a person’s death. Even when looked at practically and dispassionately, however, there are plenty of other reasons to avoid “death bonds.” Their terms are based on estimates of a person’s lifespan, which are rarely accurate. Like UCIS investments, they benefit from no protection from the FCA or other financial bodies. Mis-selling of death bonds is relatively common compared to many other investment types, and once again the lack of regulation gives you no protection or legal recourse. Lastly, a high percentage of death bonds simply fail completely. If this happens to you, you will not only fail to receive the promised returns but lose your money altogether.

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Stocks and Shares: Should you Really “Buy When They’re Friendless?”

It’s an old stock market maxim: “buy when they’re friendless.” Sometimes this forms one half of a longer saying: “buy when they’re friendless, sell when they’re fat.” It is often circulated as a meaningful and profitable truism, even as the phrase which comes closest to encapsulating the essence of the stock market in a single sentence. But how good is this advice really?

The Principle

In essence, this saying embodies a principle that is exceptionally basic, even essential to stock market investment. It is an incarnation of a concept as simple, eve, obvious, as “buy as cheap as you can, sell as high as you can.” In stock market terms, this means buying when prices are favourable but growth is anticipated. However, this maxim takes it to an extreme which some investors swear by and others eschew. It means buying shares in companies that are “friendless” – in other words that are seeing prices plummet because other investors are ignoring or abandoning them. Usually, this equates to investing in companies that are undergoing genuine hardships. A current example might be the crisis that Tesco has been embroiled in following the revelation that its profits were significantly lower than claimed.

The Pros and Cons

The advantage of this approach is that by taking the principle that underpins much stock market activity to its extreme, it carries the potential to amplify returns significantly. Buying when companies find themselves “friendless” allows you to benefit from rock-bottom prices. Then, when things turn around, you hope to experience huge growth before selling for a tidy profit when other investors return and companies find themselves “fat” once again.

Of course, only the very daring or the very foolhardy would invest in a company that is friendless because it is in actual danger of ceasing to trade. Rather, this tactic will usually be used for companies that are in significant difficulty but which the investor does not really expect to be in danger. Even so, just as it amplifies the potential for profit so it also amplifies the risks of stock market investment. You may underestimate the amount of danger a company is in and find yourself losing out. Furthermore, whatever crisis has left the company “friendless” may take a new turn, which either increases the danger level or causes prices to plummet further and thus impacts on your eventual profits. Furthermore, this kind of turnaround rarely happens overnight. Even used successfully, this tactic is often a longer-term one which often involves losing money in the meantime.

Ultimately, this can be a good maxim to follow, but it should be approached cautiously. Think very carefully about “friendless” investments, and only make them if you are happy with higher-than-usual risk levels. Furthermore, under no circumstances is it advisable to make such a high-risk move without significant portions of your portfolio tucked away in safer places.

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