Category

Residential Property

Unique Manager Showcase Event, London

By | Residential Property

The Unique Manager showcase is returning to London on the 26th June 2019, bringing together the best boutique Fund Managers in the investment space across several asset classes covering:

  • Equities
  • Structured Products
  • Fixed Income
  • Alternatives
  • Tax Efficient Investments

Along with plenty of interesting Managers there will be CPD accredited seminars and panel discussions with industry experts.

Announced Managers:
Unicorn Asset Management
EG Capital Advisors
Atlantic House Fund Management
Sanford DeLand Asset Management
and many more.

Further Details:

Date: Wednesday 26th June 2019

Time: 9:15am – 15:30pm

Event Type: Manager Events

Location: London

Venue: Leonardo Royal Hotel, St Paul’s, London

To register for the event please to go:
https://uniquemanagershowcase.com/events/unique-manager-showcase-london

Boost for housing market as Japan’s biggest housebuilder, Sekisui House, moves into UK

By | Residential Property, Social Housing

Japan’s biggest housebuilder will move into the UK housing market with immediate effect after striking a multi-million pound deal that will see it work with Homes England and Urban Splash to deliver thousands of new homes across England.

  • £90m investment boost to the UK housing market
  • Sekisui take a 35% equity stake in Urban Splash’s modular House business
  • Investment will deliver new housing stock using modern methods of construction

Sekisui House, one of the world’s leading housebuilders, are pioneers of modern methods of construction, where homes are built in factories and then shipped out to sites.

The £90m deal, which has been facilitated by lead real estate and financial advisor JLL, comprises a total new investment of £55m into regeneration company Urban Splash’s ‘House’ development business. It provides a significant boost to the UK’s modular housing industry and will help to speed up production of much-needed new homes.

Sekisui House have invested £22m of new equity, with £30m of equity and debt funding coming from the Government’s Home Building Fund, administered through Homes England.

Experienced entrepreneur Noel McKee, founder of We Buy Any Car, has also made a sizeable investment in the new partnership and will take an incremental c 5% stake.

Yoshihiro Nakai, President and Representative Director of Sekisui House Ltd said:

“We are extremely pleased to be able to work together with Homes England and Urban Splash to establish our operations and help to create outstanding communities in the UK.

“Using modern methods of construction to build high quality homes with short build times is one of our company’s great strengths. Our technology and know-how can help resolve pressing social issues in the UK, and I want to see us play our part effective immediately. These operations can also help bring vitality to UK regions, and we will work to make the strongest connections with the local communities.”

‘House’ is expected to deliver thousands of homes across England using modern methods of construction.

Minister of State for Housing, Kit Malthouse MP, said:

“Sekisui House bring with them a proven track record in harnessing the modern methods of construction that are transforming home building.

“Backed by Government investment, today’s announcement will support our urgent mission to deliver more, better and faster home construction to ensure a new generation can realise the dream of home ownership.”

Homes England, the government’s housing accelerator, has been instrumental in providing significant financial support and expertise to the new partnership as well as providing assurance to the investors.

Sir Edward Lister, Chair of Homes England, said:

“When Homes England launched last year we said we’d disrupt the housing market to increase the pace of construction. By helping bring one of the world’s largest and most innovative housebuilders to UK shores, we’re putting our money where our mouth is.

“By creating a more diverse landscape – where smaller builders such as Urban Splash get a stronger foothold – we’re rebuilding the building industry; driving up quality and improving consumer choice.”

Tom Bloxham MBE, Chairman of Urban Splash, said:

“We believe that there is a real opportunity in the UK housebuilding industry. We hope to leverage our 25 years of place-making experience and our recent investments into modular housing by bringing in new partners; having looked far and wide we chose Sekisui House from Japan because of the company’s unrivalled global experience in modular construction and shared values and philosophy that we are making homes not units, and a joint belief in the need for a green future.

“We are also proud to partner with Homes England – part of the UK Government – because of their commitment to modular and desire to grow capacity in the UK housing business.

“We are incredibly excited about the accelerated production of much-needed homes and evolving traditional practices as we embrace the benefits of innovative offsite construction. I hope it will establish us as the housing partner of choice for landowners – both public and private.”

Source: Homes England

Brexit effect on UK house prices is changing

By | Publications & Reports, Residential Property

The latest data from mortgage lender Nationwide has added to growing signs that any impact of Brexit uncertainty on UK house price growth is starting to ease.

Growth in British house prices picked up slightly in April, with a year-on-year rise of 0.9%, up from an annual rise of 0.7% in March. The average price for a property in the UK now stands at £214,920 ($280,656). Month-to-month figures show prices were up 0.4% between March and April, marking the biggest increase since November.

“While the ongoing economic uncertainties have clearly been weighing on consumer sentiment, this hasn’t prevented further steady gains in the number of first-time buyers entering the housing market in recent quarters,” said Robert Gardner, chief economist at Nationwide.

“Indeed, the number of mortgages being taken out by first-time buyers has continued to approach pre-financial crisis levels in recent months,” Gardener added.

“First-time buyer numbers have been supported by the strength of labour market conditions, with employment rising at a healthy rate, and earnings growth slowly gathering momentum.”

Although house prices growing by just under 1% doesn’t seem too much to laud over, the consistent rise over the last few months has shown that some pockets of buyers are shaking off Brexit uncertainty.

“Given the previous years of outstanding house price growth, we could be forgiven for thinking that anything below the 1% mark where the annual rate is concerned, is entering life support territory,” said Marc von Grundherr, director of estate agent Benham and Reeves.

“This simply isn’t the case and while the rate of price growth has paused for breath, it remains within easy reach of wider targets for the year as we enter just the second quarter, von Grundher added.

“Without the sufficient market fuel of buyer demand and replenished stock levels the market may struggle to make it out of second gear, however, it’s likely that we will see conditions accelerate through the spring and summer seasons with some more positive growth levels registered despite the continued uncertainty of Brexit.”

Source: Yahoo News

Chancellor offers £3bn fix for Britain’s ‘broken housing market’

By | Residential Property, Social Housing

Philip Hammond’s spring statement includes funding to build 30,000 affordable homes.

A new £3bn scheme will fund the building of 30,000 affordable homes, the chancellor has said, as he proclaimed that the government was on track to reach its target of 300,000 new homes a year in Britain.

Philip Hammond’s spring statement also contained a patchwork of separate schemes to boost housebuilding, including £717m to “unlock up to 37,000 homes” in the Oxford-Cambridge arc, Cheshire and west London.

“The government is determined to fix the broken housing market,” said Hammond. “Building more homes in the right places is critical to unlocking productivity growth and makes housing more affordable.”

Under the affordable homes guarantee scheme – an existing programme that will receive renewed government support – the government does not directly fund new homes but gives a Treasury guarantee to housing associations to allow them to build.

The housing charity Shelter said while it welcomed the boost for affordable homes, borrowing by housing associations would not solve the housing crisis, and the government needed to fund much higher levels of social housing.

Polly Neate, chief executive of Shelter, said: “The government’s decision to renew the affordable housing guarantee scheme is a welcome announcement. This initiative will support the building of more desperately needed social and affordable homes.

“While this is good news, it has to be noted that we can’t deliver social housing on the scale we need on borrowing alone – 3.1m social homes are needed in the next 20 years to tackle the housing crisis at its root and lift thousands of families out of homelessness. We need much more grant funding for social housing in this year’s spending review to get a grip on our ever-growing housing emergency.”

Official government figures show that affordable homes – for sale or to rent – make up a relatively small, but growing, part of the housing supply in England.

In the six months to 30 September 2018, there were 9,909 new affordable homes started, up from 6,989 in the same period of 2017.

The definition of what “affordable” means is controversial. The government defines it as “social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market”. It includes shared ownership homes for sale “provided at a cost above social rent, but below market levels”.

Source: The Guardian

CBRE launches £250m Affordable Housing Fund

By | Residential Property, Social Housing

This month has seen CBRE Global Investors, one of the world’s giant real asset investment managers with $104.5bn in assets under management, launch a £250m Affordable Housing Fund. The investments are from 13 institutional investors, including social investment institution, The Big Society Capital. Twelve out of 13 of the  investors are new to the affordable housing sector. Coming from the UK and Europe, the institutional investors include “pension funds and insurance companies”. Hannah Marshall, Head of UK funds commented, “If you look at Europe, you can see that for many of the Dutch pension funds, it’s already quite central to their agenda; you can see some of the bigger investors actually implementing targets – wanting to have a certain percentage of their portfolio in impact investment within the next five years, for example.”

The Fund will invest in social and affordable rented housing, shared-ownership properties, homeless hostels and housing for ‘key workers’, such as nurses. It is designed to make a social impact, while targeting a 6% total return. Ms. Marshall stated, ‘Our strategy contributes towards our investors ESG targets, and generates a positive social impact as we invest in the funding of homes for those households unable to afford to rent or buy in the open market’.

The Fund will act as a Social Landlord, leasing the properties to Registered Providers, as opposed to setting up their own RP for now. Investments will be sourced from house builders, individual RPs and Local Authorities and will include “both development and buying existing portfolios”.

Impact investing continues to gain traction among institutions into 2019, and the trend remains for investors and real estate fund managers to explore the opportunity within the social and affordable housing sector in the UK. In December, Legal & General Affordable Homes was granted registered provider status, helping push Legal & General’s affording housing initiatives.

 

Source: Investment and Pensions Europe

Investment Week: Sustainable & ESG Investment Awards 2018

By | Residential Property, Social Housing

Best ESG Fund Management Group (Generalist)
Hermes Investment Management – WINNER
Kempen Capital Management
Martin Currie Investment Management
Montanaro Asset Management
Newton Investment Management
Pictet Asset Management
Robeco – highly commended

Best ESG Fund Management Group (Specialist)
Castlefield Investment Partners
DWS Responsible Investments
EdenTree Investment Management – WINNER
HSBC Global Asset Management
Impax Asset Management – highly commended
Kames Capital
Legal and General Investment Management
Liontrust Asset Management

 

Best Environmental Fund
CB Save Earth Fund
Impax Environmental Markets Plc – WINNER
Pictet Global Environmental Opportunities Fund

Best Ethical Investment Fund
Amity UK Fund
CB European Quality Fund
Kames Ethical Cautious Managed Fund
Kames Ethical Equity Fund
Newton SRI Fund for Charities
Premier Ethical Fund
Rathbone Ethical Bond Fund – WINNER
Standard Life Investments UK Ethical Fund


Best ESG Investment Fund

Arabesque Systematic
Davy ESG Equity Fund
F&C Responsible Global Equity Fund
Hermes Global Equity ESG Fund – WINNER
Kempen (Lux) Sustainable European Small-cap Fund
LGIM Future World Gender in Leadership UK Index Fund
Muzinich Bondyield ESG Fund

Best Sustainable Investment Fund
Brown Advisory – U.S. Sustainable Growth Fund
Castel Residential Property Fund
FP WHEB Sustainability Fund – WINNER
Hermes Impact Opportunities Equity Fund
Insight Sustainable Euro Corporate bond fund
Janus Henderson Global Sustainable Equity Fund
Kames Global Sustainable Equity Fund
Liontrust Sustainable Future Managed Fund
Royal London Sustainable World Trust
Wellington Global Impact Fund

Best New Entrant – Fund
Baillie Gifford Positive Change Fund
Castlefield B.E.S.T Sustainable European Fund
Foresight Smart Bonds Fund
FP Foresight UK Infrastructure Income Fund (FP FIIF)
M&G Impact Financing Fund – WINNER
Montanaro Better World Fund
UBAM – EM Sustainable High Grade Corporate Bond
VT Gravis Clean Energy Income Fund

Best New Entrant – Services
Heartwood Sustainable Multi Asset Strategies
Smart Pension
Tribe Sustainable Impact Model Portfolio Service – WINNER

Award for Innovation (Funds)
Amundi Planet Emerging Green One
Castlefield B.E.S.T Sustainable Portfolio Fund
Davy ESG ex Fossil Fuels
HSBC Global Lower Carbon Bond Fund
Mirova Natural Capital Althelia Funds
Pictet Global Environmental Opportunities Fund
RobecoSAM Global SDG Credits Fund – WINNER
Standard Life Investments Global Equity Impact Fund
Threadneedle (Lux) European Social Bond Fund
Trium Morphic ESG L/S UCITS

Award for Innovation (Portfolios)
Canaccord ESG Service
Barclays Sustainable Total Return Strategy
Financial Express Investments – Responsibly Managed Portfolios
Thomas and Thomas Pro-Ethical Portfolio Service – WINNER

Award for Innovation (Non-fund)
Arabesque S-Ray
CPR Asset Management – Risk Management through ESG material signals
ixo Protocol – WINNER
Schroders Climate Progress Dashboard
Thomson Reuters ESG Data

Award for Innovation (Research & Methodology)
BMO Global Asset Management – SDG Mapping and Engagement
Bridges Fund Management – Impact Management Project – WINNER
Davy Asset Management – ESG Valuation Model
Morningstar® Portfolio Carbon Risk ScoreTM
RobecoSAM SDG framework
S&P Global Ratings Green Evaluation
Thomson Reuters Diversity & Inclusion Index
Tribe Impact Methodology
WHEB Asset Management – Impact Report 2017 and Interactive Impact Microsite

Best ESG Research Team
AVPN
BMO Global Asset Management – WINNER
DWS
Hermes Investment Management
Montanaro Asset Management
S&P Global Ratings
Storebrand Asset Management

Best Thought Leadership Paper on Sustainable Investing
AVPN – The Continuum of Capital in Asia – WINNER
Castlefield Investment Partners – Corporate Governance – “Remuneration: Pension Provisions”
DWS – Measuring Physical Climate Risk in Equity Portfolios
EdenTree Investment Management – The Future of Work
Fidelity – Pulling away: Inequality as an ESG risk
Hermes – Modern Slavery: The true cost of cobalt mining
Lazard Asset Management – The Growing Importance of the “E” in ESG / Giving Credit Where It’s Due
Morningstar – Passive Fund Providers Take an Active Approach to Investment Stewardship
P1 Investment Management – Investing in extreme weather conditions
Schroders – Carbon Value at Risk

 

Source: Investment Week 2018

Making sense of ESG popularity

By | Residential Property, Social Housing

The rise of ethical funds and sustainable investment brings into question just how broad and subjective the space can be  

One of 2018’s most-used buzzwords in investment has been “ethical”. The rise in popularity of environmental, social and governance investing has been widespread, and in 2017 more than £1bn of net retail money flowed into ethical funds, the highest annual inflows on record.

As of October this year, ethical funds under management reached £16bn, representing a 1.3 per cent share of industry FUM, according to the Investment Association. In the month of October alone, net retail inflows reached £91m.

So where did it all begin? The origins of responsible investing in the UK date back to efforts of investors who were Quakers, when the society prohibited its members from the slave trade in the 18th century.

The same century saw Methodist figures align their business activities with their faith.

Faith-based investing is one approach to responsible investing. It is for clients who wish to invest in accordance with their faith, and many such investment solutions are available. The most prominent type of faith-based investment is Sharia-compliant investment, or Islamic finance.

As ethical funds have been gaining in popularity, the pressure is on for advisers to be able to understand the sector, and the diverse language that goes with it.

Investing for a better world

Ethical consultancy SRI Services founder Julia Dreblow says the work she has done in the past seven years is centred on how to classify this area of investment so it makes sense for advisers.

The interest of advisers in responsible investing has hugely increased in recent years, she adds.

Heron House Financial Management founder Saran Allott-Davey has been offering advice on investments aligned with her clients’ personal beliefs for 24 years. She too has seen a “significant increase” in clients’ interest as well as the availability of funds.

“I think part of this is due to the  high profile that climate change and plastic pollution have had in recent times and people realising they have to do their part,” she says.

Offering advice on investment solutions tailored to clients’ personal beliefs could be a way for advisers to stand out from the crowd and attract new clients.

Morningstar Europe director of passive strategies and sustainability research Hortense Bioy says that it provides planners with an opportunity to have a deep conversation with clients and connect with them.

She believes that offering advice on responsible investing gives advisers a chance to truly differentiate themselves.

Women and millennials in particular are increasingly asking for advice on investment in line with their ethical principles, she adds.

When it comes to regulation, the European Commission revealed in its Action Plan on sustainable finance that it is seeking to amend Mifid II to require “incorporating sustainability when providing financial advice” over the course of 2019.

It recommended advisers should be required “to ask about, and then respond to, retail investors’ preferences about the sustainable impact of their investments, as a routine component of financial advice”.

In preparation for any potential changes to regulation, advisers will need to have knowledge of the responsible investment landscape and any available investment offerings.

Communicating responsible investing to clients

A good start to map investor preferences is via a simple fact-find. SRI Services offers a questionnaire on its website, asking clients whether they would like to consider environmental, social, ethical or religious issues when looking to invest.

Dreblow believes SRI and ESG issues should be a part of every adviser’s initial fact-find questionnaire.

Advisers should first identify what issues appeal to the client the most based on the questionnaire outcome, followed by a discussion. Allott-Davey says sometimes it is clear straight away that the client is not concerned with aligning their investments with their world views. “And that’s completely fine,” she says.

She adds that when her clients show interest, the next phase is educational. She finds that clients usually have a “basic understanding” of ethical investments. This is where the adviser can step in to help clients navigate the market and introduce what solutions are on offer.

Apart from identifying which issues are close to the client’s heart, advisers and clients should together decide on the most suitable investing style.

Dreblow notes that despite the increase in demand, this area of investing is still rather small and many advisers can get overwhelmed with it.

Similarly, Bioy says that the seemingly robust landscape with a multitude of labels and approaches can pose a barrier for advisers to enter the space. She says that her team is currently finalising a set of tools for advisers to help them learn the industry language. The whole project is set to be completed by early February.

Jargon busting

The oldest and most commonly used approach to ethical investing is to start with a negative screen. This takes all stocks available and removes the ones that do not invest in line with the manager’s strategy. It is individual to each fund manager but can cover areas such as tobacco, arms, gambling, and can exclude companies based in countries they believe to have a repressive regime.

Dreblow explains that there are many different styles of responsible investing. She says: “Someone could look at climate change and say: ‘We need to avoid oil or mining companies’. Others would say that a better strategy would be to hold shares of a company and talk to them and encourage them to reduce their emissions.”

According to Dreblow, both investing styles – negative screening as well as responsible or active ownership and engagement – complement each other.

“They can work well together. From a company’s perspective, if [the company] thinks that people might sell their shares, then it is more likely to respond to engagement.”

Bioy calls this an “ESG value contrarian approach”, in which the manager looks for companies with low ESG ratings and an assumed potential of future increase in these scores.

ESG versus impact investing
Choosing investments with ESG issues in mind is not strictly a goodwill act. It can have financial incentives too.

As Bioy points out, excluding (for example) tobacco firms can make sense from an investing perspective as changes in consumer preferences, as well as trends in regulations, suggest that these firms are on the decline and do not hold much promise of future rewards for shareholders. The same goes for oil companies, she says.

Investing in companies which score well on environmental (such as carbon footprint), social (human rights or working conditions), or governance (this can include, but not limited to, gender equality) issues can be a savvy investment decision.

Bioy says: “Studies have proved that companies with good ESG ratings provide higher returns.”

Impact or thematic investing (investing which focuses on companies actively trying to find solutions to the world’s stinging challenges like a shift to renewable energy or waste and water management) are more likely to provide shareholders with returns than past winners like oil firms. Bioy says that the future is already happening; electric cars could fully replace petrol- or diesel-engine cars in two decades.

The final step for advisers is to identify the best fund options. SRI Services offers a comprehensive list of such funds, while Morningstar has a sustainability rating which evaluates how well companies in a fund’s portfolio are managing the ESG investing factors relevant to their industries.

With inflows continuing to go through the roof and more providers creating ethical offerings, it is one area that advisers must fully understand and be prepared for when talking to clients.

Source: Money Marketing

UK house prices pick up amid ‘subdued’ market

By | Residential Property

Values rise by 0.3% in November – but few predict rapid growth in short-term

House prices inched ahead in November but Brexit uncertainty has left the property market “relatively subdued” according to Nationwide building society.

The average UK home rose in price by 0.3% month-on-month, pushing the annual rate of inflation up to 1.9%, up from 1.6% the previous month. The average home now costs £214,044.

However in cash terms the average price of a home in the UK actually fell by nearly £500 on the month, but because of seasonal adjustments used by Nationwide, its index recorded a rise.

The direction of house prices will be heavily dependent on the outcome of the Brexit vote on 11 December and what emerges after that. Nationwide said that if the uncertainty lifted, then prices were likely to spring back.

Its chief economist, Robert Gardner, said: “If the uncertainty lifts in the months ahead and employment continues to rise, there is scope for activity to pick up through next year.

“The squeeze on household incomes is already moderating and policymakers have signalled that, if the economy performs as they expect, interest rates are only expected to rise at a modest pace and to a limited extent in the years ahead.”

But the Bank of England’s warning this week that house prices could tumble by 30% following a no-deal Brexit is already having an impact on the market, according to property experts.

Jonathan Hopper, managing director of Garrington Property Finders, said: “While the ‘armageddon’ scenarios run by Mr Carney will be brushed off by many as unlikely, they will further sober the thinking of over-optimistic sellers and cautious buyers.

“For now, his comments have served only to dial up the uncertainty – and the pattern of subdued business-as-usual continues.

“Despite the shortage of homes for sale, a steady stream of strategic buyers are pouncing on buying opportunities that may not be around if the market normalises in 2019.”

Nationwide highlighted how the supply of housing was improving after a decade in which Britain had not built sufficient housing for a growing population.

It said: “After falling by almost 60% in the wake of the financial crisis, there has been a significant pick-up in construction in recent years. New-build completions in England in 2017/18 reached 195,300, around 3% below 2007/08 levels.”

It added that once additional dwellings were counted – particularly from the wave of office-to-residential conversions, then housebuilding has virtually returned to peak 2007 levels. In total, 1.9m dwellings have been built in England since 2007, representing an 8.5% increase in the total stock of homes.

Source: The Guardian

People should be proud of their council house – Theresa May

By | Residential Property, Social Housing

People who live in council houses should be made to feel proud of their homes, Theresa May has said.

The PM announced £2bn to build new homes in England, in an attempt to remove the “stigma” of social housing.

Under the plan, housing associations, councils and other organisations will be able to bid for the money to spend on new projects, starting from 2022.

Labour said the announcement fell “far short” of what was needed for the social housing sector.

BBC home editor Mark Easton said the government hopes the money will allow local authorities and housing associations to build schemes that would otherwise seem too risky.

He said the sector’s calls to provide more confidence about future funding – so the 300,000 extra homes required in England each year can be built – had appeared to have been listened to.

Mrs May told a National Housing Federation summit in London: “Some residents feel marginalised and overlooked, and are ashamed to share the fact that their home belongs to a housing association or local authority.

“On the outside, many people in society – including too many politicians – continue to look down on social housing and, by extension, the people who call it their home.”

She will encourage housing associations to change how tenants and society view social housing.

“We should never see social housing as something that need simply be ‘good enough’, nor think that the people who live in it should be grateful for their safety net and expect no better,” she said.

“I want to see social housing that is so good people are proud to call it their home… our friends and neighbours who live in social housing are not second-rate citizens.”

In mixed developments, she said it should be impossible to tell the difference between full-price and affordable housing, which should not be “tucked away out of sight and out of mind”.

David Orr, chief executive of the National Housing Federation, said the prime minister’s announcement was “extremely welcome”.

“This represents a total step change. For years, the way that money was allocated meant housing associations couldn’t be sure of long-term funding to build much-needed affordable housing,” he said.

He said that by changing the way the funding was allocated, ministers had given “long-term confidence and confirmed that we are trusted partners in solving the housing crisis, building new homes and communities”.

But shadow housing secretary John Healey said the reality was spending on new affordable homes had been “slashed” and the number of new social rented homes built last year “fell to the lowest level since records began”.

“If Conservative ministers are serious about fixing the housing crisis they should back Labour’s plans to build a million genuinely affordable homes, including the biggest council house-building programme for more than 30 years,” he said.

The English housing survey for 2016/17 reported that 3.9 million households – about nine million people – lived in the social rented sector, which was 17% of households in the country.

The funding covers the next spending review period, from 2021 through to 2028.

Downing Street said the money was separate to the £9bn of public funding put toward the existing affordable homes programme until 2022.

Source: BBC News

UK inflation hits six-month high of 2.7%

By | Residential Property

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.”

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.

Theatre tickets

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.

Temporary rise

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.

Source: BBC News

 

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