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All change?
All Areas > Legal & Finance > Money Matters
Author: Roger Downes, Posted: Monday, 17th December 2018, 09:00
The start of a new year is a time for looking first back and then forward. Often I would play a game of predicting what might happen in the financial world in the next twelve months, but anyone who tells you they can do that with confidence is lying. The year ahead promises to be one of the most turbulent on record politically and in the financial world. You think 2018 was bad? That was only the posturing phase; in 2019 we will see the realities of the fall out from those political manoeuvrings.
As I can’t tell you what will happen, there’s not much point in speculating about what might take place, but it’s worth looking at the impacts that certain measures might create. This isn’t a new version of ‘Project Fear’ about the implications of the UK leaving the European Union, more an attempt to explain what happens if...
The stock market crashes. Very few ordinary people have a lot of investments in shares. I’ve still got a few from when it was popular to buy privatisation issues, but for most of us, the impact of a major fall in the value of shares will be on our pensions. All of the pension funds hold the majority of their money in one form of investment or another and, whilst fund managers will tell you that they spread the risk as best they can, there is no doubt that anyone in a defined contribution scheme will take a big hit.
Inflation becomes rampant. Fairly obvious really – the cost of everything we buy goes up and our wages struggle to keep pace. We all demand bigger increases in pay, which stretches employers to the point where they cannot afford to award those increases and therefore have to consider laying off staff or, worse still, ceasing to trade.
Interest rates rise. Often used by the Bank of England to stem inflation, but I’m not sure it really has the desired effect. For many of us, our largest monthly outgoing is our mortgage payment, so if that becomes more expensive, we still need the pay rise to help cover it.
The value of sterling plummets. Our holidays become more expensive, but remember the same happens to everything that we buy from abroad, so the cost of manufacturing could rise and there will be even more pressure on businesses in certain sectors. Others, who are selling abroad, will love it, but the concern is for those whose costs will rise and the knock-on effect for those businesses generally.
As a country, we have enjoyed stability in these areas for the last decade, which may have caused us to become complacent, but has certainly got us used to a lack of turbulence. Fasten your seat belts as it’s going to be a rather bumpier ride through 2019. Whatever it brings, a Happy New Year to you and yours.Copyright © 2024 The Local Answer Limited.
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