Growth strategy clearer as EU doubts remain

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Going into the UK General Election in May, the opinion polls suggested very little chance of a single party getting enough seats to govern on their own.

Economic policy was expected to be a compromise negotiated between multiple parties, but as we now see the Conservative party has full control and is determined to drive forward with its vision for the UK.

The budget in July and a visit to China in September gave us a clearer picture of what that vision is for our Northern region.

Many of the changes such as cuts in benefits and corporation tax came as no surprise but other areas of the budget had policy changes that seemed to be borrowed from the Labour party and did catch commentators by surprise.

The biggest surprise was the new “National Living Wage”, raising the minimum wage to £9.35 by 2020.

The exact economic impact is difficult to judge, but the Chancellor estimated that it would cost a relatively modest 60,000 jobs in the long term.

It might also put upward pressure on inflation as companies try and pass on high wage costs.

More positively it should help to support incomes and consumer spending in the North, with up to 250,000 in Yorkshire set to benefit directly from the policy according to the Treasury.

This would offset to some extent the impact of cuts to tax credits.

The Chancellor also restated his intention to put the “power into the Northern Powerhouse”.

This includes developing connections between northern cities but also devolving further powers to Manchester with a similar deal in progress with Sheffield, Leeds and West Yorkshire.

George Osborne’s announcement was shortly followed by a trade trip to China where, along with northern business leaders, he pitched Chinese companies to encourage investment in the HS2 high speed rail link, as well as regeneration projects in Leeds and Sheffield.

The Chancellor’s initiatives to attract foreign investment and his commitment to further cut corporation tax is a clear sign that the UK and Yorkshire are open for business, and should be supportive of company profits and the equity markets.

In regards to the property market, recent ONS figures show that a comparatively ‘cheaper’ Yorkshire region is seeing the biggest rise in England, increasing at a rate of 4.8 per cent on August 2014 prices.

At £186,000 on average, house prices in Yorkshire surpassed their pre-economic downturn peak reached in 2008 for the first time in August.

This trend in the region should be supported by stronger earnings growth, growing consumer confidence as well as continued low mortgage rates.

It is also encouraged by a number of recent Government measures, mainly impacting the property market in the South East and taking some of the heat out of the London market.

Amongst them are a higher stamp duty for the top end of the housing market, restrictions on non-domiciled status and measures to curtail tax avoidance on property via company structures.

Overall the UK looks in good shape to continue the steady recovery and unemployment can be expected to remain low relative to most of Europe, with a special mention to Yorkshire which is seeing the largest fall in unemployment in England, outside of London.

However, the big cloud on the horizon remains the planned referendum on UK membership of the European Union.

Whilst our expectation is that the UK will vote to remain in the European Union, this cannot be taken for granted and there will be a period of uncertainty until the referendum has taken place.

The Yorkshire office of SGPB Hambros, led by director Chris Perkins, looks after local wealthy individuals and families in the North.

The bank provides wealth management, fiduciary, investment and financial planning services for its clients.

Hambros believes that Yorkshire and its ridings will play a central role in the success of the Northern Powerhouse concept over the coming years.

It said that the promotion of Leeds as a financial centre, second only to London, boosts the region’s attractiveness to start-up companies and new businesses, making it the natural choice for a regional office for Hambros, which has opened an office on the Harewood Estate, between Leeds and Harrogate.

It said clients also benefit from the worldwide expertise and resources of Société Générale.