The UK inflation rate unexpectedly rose in August to 2.7%, the highest level in six months.
Economists had expected a Consumer Prices Index rate of 2.4%. The pound rose after the data was released by the Office for National Statistics.
Wages are still rising more than inflation, with data last week showing wages, excluding bonuses, grew by 2.9% in the three months to July.
Rising prices for recreational goods, transport and clothing drove the rise.
In July, CPI was 2.5%, which had been the first jump in the index since November.
Mike Hardie, head of inflation at the ONS, said: “Consumers paid more for theatre shows, sea fares and new season autumn clothing last month.
“However, mobile phone charges, and furniture and household goods had a downward effect on inflation.”
Prices rose less sharply for furniture, household goods and communications.
The year-on-year rise in CPI in August meant that inflation was narrowing the gap with wage increases, with economists waiting for the August earnings figures.
“Today’s inflation data show the rate of price growth accelerated in August, and may well prove to have exceeded total earnings growth in the same period. Unless UK workers can increase their productivity, this trend is likely to continue – squeezing living standards over the medium term,” said Alastair Neame, senior economist at the Centre for Economics and Business Research.
Sterling rose to $1.32 following the news, its highest level since July.
“The numbers reinforce expectations that policymakers will gently lift interest rates over the next couple of years,” said Ben Brettell, senior economist at Hargreaves Lansdown.
The Bank of England raised its key interest rate for only the second time in a decade last month. The current interest rate of 0.75% is the highest since March 2009.
It has also forecast that inflation will fall back to the target rate of 2% by 2020.
“The figures won’t come as welcome news to the Bank of England, though – they’ll be desperate to leave policy unchanged until we get some clarity over Brexit and won’t want to be forced into a rate rise by accelerating prices,” said Mr Brettell.
The CPI measure reached 3.1% in November 2017, when price rises were fuelled by the weakness in the pound following Brexit vote.
In August, the largest change in prices was in the cultural services sector, where theatre tickets rose, and also games, toys and hobbies, while prices for computer goods rose after falling a year ago.
The ONS said transport costs as a component of inflation increased, largely because of rises in sea and air fares. Petrol prices, though, rose by 1.4 pence between July and August, less than the 1.8 pence rise of a year earlier.
The average price of clothing and footwear rose 3.1% between July and August, faster than the 2.4% a year before. While clothing prices usually rise between July and August, the ONS said women’s and children’s clothing drove the rise.
Howard Archer, chief economic adviser to the EY Item Club, said the fact that the inflation rise was fuelled by reaction and cultural goods meant it would be temporary.
“We would expect this to unwind in next month’s release,” Mr Archer said.
The Retail Prices Index (RPI), a separate measure of inflation, was 3.5% in August, up from 3.2% in July.
PRINCE William is set to launch a new workplace mental health initiative on Tuesday, which is designed to provide employers with improved access to tools and materials required to better support staff.
The Duke of Cambridge will unveil his Mental Health At Work project at an event in Bristol on Tuesday, which will include an online portal providing access to resources, training and information for managers in order to provide support for employees.
Prince William will visit Bristol’s Engine Shed, an innovation centre located in Bristol Temple Meads railway station, and will attend workshops demonstrating the online portal in action.
The initiative has been created in partnership between the Royal Foundation, the Duke and Duchess of Cambridge’s charitable trust, and the mental health charity Mind.
Paul Farmer, chief executive of Mind, commented on the initiative, stating: “We know that employers want to do more and are starting to see mental health as a priority, but often don’t know where to start.
“The new online Mental Health At Work gateway will change that.
“Over the last few years employers have begun to take staff well-being more seriously and we know that many are doing great work around mental health in the workplace.
“Now is the time for a step change in how we think about mental health at work.”
The initiative will be open to all businesses, but will be particularly focused on small and medium sized organisations, which regularly struggle to access sufficient resources.
Alan Soady, head of media at the Federation of Small Businesses, commented on the issue to Sky News, stating: “For the small business employer without an HR department it’s important that they’re given help, support and guidance to allow them to do that for their staff and also look after their own well-being.”
Prince William will deliver a speech at the event, alongside Antonio Horta Osorio, the chief executive of Lloyds Bank, who will outline his own struggles in the workplace.
The Duke will also meet representatives from a number of organisations who have shown leadership in promoting and advancing mental health initiatives in the workplace.
The project will expand upon the Prince’s previous work on mental health as part of his Head Together campaign, which sought to end the stigma surrounding mental illness.
A survey conducted by Mind into wellbeing in the workplace revealed that almost half of the 44,000 people questioned had experienced poor mental health in their current roles.
However the research also revealed that only half of these individuals had talked to their employers about the issue.
This suggests that as many as one in four UK workers struggle in silence with issues including anxiety, stress and low moods, costing employers between £33-£42billion every year.
It is now almost exactly two years since the Brexit referendum (23rd June 2016) and coming up on 18 months since the triggering of Article 50 (28th March 2017), this means that there is now a reasonable amount of data on which to form a view of how Brexit has impacted the property market.
The property market before the Brexit referendum
With the benefit of hindsight, the UK housing market turned out to be something of a canary in a coalmine for the financial crisis of 2008. It took a sharp downturn in 2007 and needed an unusually-long five years, to get back to its pre-crash peak. This, of course, was against a backdrop of highly interesting times in the mortgage market since the events of 2008 caused lenders to ram hard on their lending brakes and regulators to start taking a keen interest in mortgage-lending practices.
What we now know as the Mortgage Market Review actually began in 2009, but it took until 2014 for it to be fully implemented. There is a case for viewing the MMR as the unofficial end to the period of chaos, since it gave lenders formal, regulatory clarity over what was expected of them and hence laid the ground for the market to carry on its standard, forward march on orderly terms, which it did, right up to the Brexit vote.
The property market in the aftermath of the Brexit referendum
It seems likely that the aftermath of the Brexit referendum will be etched into the memory of many people. Stock exchanges dropped, Sterling dropped and, of course, the housing market dropped. After the initial panic subsided, however, markets, and the humans behind them, began to settle and move on again.
The property market now
While the goings on in UK politics have provided plenty of fodder for political journalists, the present condition of the UK property market essentially reflects two fundamental contradictions. Firstly there is hesitancy over Brexit and, it has to be said, over recent changes to the buy-to-let market.
Secondly, there is the indisputable fact that the UK has an undersupply of property in general and residential property in particular and that there would either have to be a significant exodus of people from the UK or a significant number of houses built in a very short space of time (or some sort of combination of them both) for this imbalance to be addressed in any meaningful way.
The result is that overall; UK property continues to increase in value, albeit at a slower pace. This headline fact, however, skims over the fact that the UK property market’s is actually a collection of different markets with different dynamics and different degrees of exposure to Brexit. For example, the London residential market is currently stagnating (although not crashing), whereas the London commercial property market is still holding its own and both the residential and commercial markets in the north of England and other parts of the UK continue to do well. In short, while the eventual form Brexit takes is currently anyone’s guess, the need for housing in the UK is simply not going to go away and therefore neither will opportunities for property investors.
The REIT brand is recognised and trusted globally – so let’s use it as a force for good in creating vibrant places, writes Jenny Brown, of Grant Thornton.
Real Estate Investment Trusts (REITs) have continued to rise in popularity since they came into force in January 2007.
Within a month, nine of the UK’s largest listed property companies had converted to REIT status and, fast forward 10 years, there are now more than 70 UK REITs.
A REIT can offer significant benefits for investors and operators alike.
The brand is recognised and trusted globally, with most major economies having an equivalent regime.
There has been a marked increase in the number of REITs coming to the market in the last five to six years, with more than 30 new REITs listing on the London Stock Exchange and raising more than £12bn of equity.
Our latest report, REIT’s as a force for good, shows that many new REIT’s are now focusing on specialist sub-sectors, such as healthcare and social housing, which meet increasing demand from investors for both a financial return and an investment that focuses on property with a social value.
The potential for REITs to meet the need for new homes in the current climate is gaining increasing interest.
A sustained shortage of government funding has forced many housing associations to take on more debt in order to develop new homes.
With the government’s aim of building 300,000 new homes each year, REITs offer investors an opportunity to be part of a financial solution to help provide more social and affordable housing by partnering with housing associations in innovative ways.
A number of new REITs are already emerging that are focused on residential property and they have seen strong demand from investors.
REITs potentially offer investors better returns than they would achieve by investing directly in the properties themselves, as well as the security and liquidity of the REIT structure.
REITs are well suited to act as the owners of property assets with a social role, by working in partnership with operators.
The collaboration between the two can provide property management expertise to complement the expertise of either public or private operators.
The lesson we can take from looking at international markets is that the government can do a lot to help stimulate investment in this area through the tax system.
Australia is facing an affordable housing shortage so the government has introduced new tax concessions to encourage REITs to invest.
Similarly, in Canada, a number of REITs focused solely on residential property are supported by significant tax advantages and these REITs have delivered some of the highest returns across the stock market.
All those involved in the UK market need to continue to build and maintain effective partnerships between REITs, developers and operators and focus on collaborating effectively.
The combination of their different expertise is vital to supporting innovative high quality schemes with a social purpose.
That will only happen if we raise awareness of the potential for REITs to deliver long-term social benefits and educate both investors and operators about the risks and rewards of the structure.
These partnerships will be able to seize the significant opportunity for REITs to build on their success and become a force for good in creating vibrant places in which people can thrive by meeting the country’s housing needs.
Government can also help support these developments by looking at further reforms to the REIT regime to widen the permitted activities in which they can invest.
Source: Jenny Brown, chief not for profit operating officer, Grant Thornton UK