E: Investors are selling of UK debt due to an unfavourable financial forecast in the Autumn Statement.
Investors have been selling large proportions of UK sovereign debt on the back of a disappointing Autumn Statement.
On November 23rd, Chancellor of the Exchequer Philip Hammond mapped out the UK’s post-Brexit future, painting a bleak picture for the nation’s public finances. He also revealed larger than expected sales in gilts – which are fixed-interest loan securities issued by the government.
The UK intends to increase gilt sales next year by £15 billion, taking the total to £146.5 billion. In the wake of the Autumn Statement, the yield on ten-year gilts – which rise when debt is sold – climbed 12 points to 1.48 per cent.
Industry experts had predicted a smaller increase in sales, with Merrill Lynch – the wealth management division of the Bank of America – forecasting a £9 billion rise.
Commenting on the news, Neil Williams, chief economist at Hermes Investment Management, said: “Financing this debt may become more troublesome if we struggle with Brexit.
“Conventional gilts may benefit initially from the perceived hit to growth, but this could be short-lived, given about one-third of gilts outstanding is backed by international investors who will care about currency and ratings risk.”
Estate agencies were also hit by the Autumn Statement, as Mr Hammond announced a ban on fees charged to tenants. Housebuilders were also affected, as the recently appointed chancellor made no mention of the Help to Buy scheme, suggesting it could be tightened to keep shares in check.
Some experts believe that the scheme could be being exploited by people who are already able to enter the market to help them purchase larger homes, when really it is supposed to support those trying to get their first foot on the property ladder.
Mr Hammond also revealed that the income tax threshold will be raised from £11,000 to £11,500 in April 2017, while the higher income threshold will climb to £50,000. Tax savings on salary sacrifice and benefits-in-kind are to be stopped, and the National Living Wage will rise to £7.50.
If the Autumn Statement has got you thinking about your personal financial circumstances, then you might want to consider the options you have to clear your debt. If you live in Scotland, then there are several avenues that can be explored.
The first is a debt arrangement scheme (DAS), which allows to repay what you owe in affordable payments over a set period of time. When you have entered into the agreement, your creditors can’t hassle you or contact you about the money you owe, relieving some of the stress attached to financial struggles.
You may also consider a trust deed in Scotland to clear your debts. This is a voluntary agreement between you and the firms you owe money to, which will see you pay back a proportion of what you owe over four years. Once this time has passed, the rest of your debt is written off, leaving you free to start again.
Sequestration – the name for bankruptcy in Scotland – is an option of you owe more than £1,500. This option will see you sign over any assets to a trustee to help pay off what you owe, meaning that you are free from most of your debt after a year.