2017 could be described as rather an odd year for money. I am sitting here now thinking about how I sum it up and the only word I can think of is ‘unpredictable’, because that’s exactly what it was. From ‘the Brexit effect’ to the sharp hike in the cost of utility bills, 2017 has only meant one thing for your money; that you are spending more of it!
With 2017 flying by in the blink of an eye with a number of big occurrences affecting our bank balance; read the Budget Insurance Blog today for our reminder of what happened in the world of money during 2017.
The Brexit effect kicked in
The 2016 decision to Brexit still continued to send shockwaves around the country in 2017, mainly because the exit strategy still seemed to be surrounded with so much uncertainty. So much so that, as I write this, we are still no closer to agreeing on how or when we will be breaking up with the EU. We know that our exit strategy hasn’t necessarily ran smoothly, but what did Brexit mean for our money in 2017?
The price of the pound ended the year at a low point
The price of the pound has been unpredictable since Brexit was announced in 2016. However, things were looking up at the start of 2017 when pound regained its value, only for this to dip and peak again throughout the year. The pound ended the year as relatively weak. Following the Bank of England’s decision to raise interest rates to 0.50%, the pound has promptly plunged against both the dollar (1.5%) and the euro (1.67%).
A weak pound sterling can affect many elements of the economy, making some things more expensive than usual. One example is that British holiday makers going abroad will find the exchange rate for euros and dollars more, so the pound will buy less foreign money for more UK sterling. The depreciation of the pound also makes importing goods into the country more expensive, as our government is finding to be the case!
Technology costs more
The prices charged to purchase certain gadgets has leapt since the sterling began to fall post-Brexit. Specifically, American technology manufacturers have increased their prices. Microsoft, Sonos and Apple are just some of the brands that have increased their prices significantly. Sonos, the American wireless speaker manufacturer, increased all of its prices earlier this year, including one rise of 25%. As quoted by Which ‘Sonos said the Brexit vote and subsequent devaluation of sterling was the main reason for the price hikes. It added that that at the time of the February increase, it paid for all components in US dollars and the dollar-sterling rate change meant it had to increase the cost of all products priced in pounds’
Apple and Microsoft items also went up by between 12% and 19%.
Grocery costs went up
Food and drink prices have risen since the Brexit vote was confirmed. As a nation, the UK got used to the low food prices following several years of deflation, so the price hike in groceries since the Brexit vote has been met with dismay as it just isn’t something that we are used to. One of the main reasons for the price hikes are the increased costs of importing goods from outside of the UK. We can’t just blame Brexit for the increased cost of our supermarket shop, with the rise in inflation also contributing to higher prices.
The financial website ‘This Is Money’ has claimed that, on average, Britons are now paying £133.00 more on their annual food shop than they did this time last year; this is the equivalent of seven additional supermarket shops! For our top tips on ‘how to keep your supermarket shop down, read our blog ‘How to beat soaring inflation at the checkout and keep the cost of your food shop down!’
Inflation took a scary turn (upwards!)
In a nutshell, inflation is the rising price of goods and services over time and the effect that this has on the economy. In November 2017 the rise of living, due to inflation, rose to a six year high of 3.1%. That means that the annual inflation rate had more than doubled from 1.2% to 3.1% from January to December last year.
For more information on what inflation means and for handy tips on how to save on your grocery shop and utility bills, read our blogs ‘How to beat soaring inflation at the checkout and keep the cost of your food shop down!’ and ‘How will inflation affect my utility bills?’.
Utility bills saw a sharp price hike!
As well as the price of your grocery shop rising, how much you pay for your utility bills also saw a sharp hike in 2017. The main reason for this hike is again, primarily, down to the rise in inflation.
Overall, in 2017, gas and electricity tariffs rose by three times the rate of inflation over the 12 month period. According to the Citizens Advice Bureau, “the average duel fuel energy bill for customers who are with one of the ‘big six’ energy firms, on a standard variable tariff has risen by £89.00 or 8.3% over the 12 months”. (*Citizens Advice)
IPT went up…again!
Insurance Premium Tax, otherwise referred to as IPT, is a tax that is added to general insurance premiums by the government. Essentially, IPT is a bit like VAT but is added onto the price of your personal insurances.
In the 2017 spring budget, Phillip Hammond stated that the standard rate would increase from 10% to 12% from 01 June 2017. The Association of British Insurers have stated that “Overall, the current rate of IPT at 12% could be adding an extra £283 a year to a typical household’s annual insurance bill as the rate has now doubled since November 2015. This latest hike will mean that the Government will take in £5.8 billion a year from IPT”.
The 2017 autumn budget was announced
The man with the red case; Phillip Hammond, ended the year by announcing the 2017 autumn budget. Whilst there were some ‘good news’ items, some were equally met with a gulp and a sigh!
Stamp duty break
One of the budgets biggest giveaway was the abolishment of stamp duty for first time buyers who are purchasing a property worth up to £300,000. The government lead ‘help-to-buy scheme will also be extended with an extra £10bn being put into the scheme to extend it until 2021.
Discounted travel for young commuters
In a bid to help save young commuters money on their rail Fare’s the young person’s railcard, currently only available to under 27s will be extended and offered to those under 31. This scheme provides young travellers with a 30% discount on their annual fare
Landlords to get a tax break
In a measure designed to please both tenants and landlords, Hammond signalled that the government would explore tax breaks for landlords who offer longer-term secure tenancies.
Diesel car drivers
>From next April, diesel vehicles that do not meet the latest standards will go up by one tax band. The chancellor said the money raised would fund a £220m clean air fund.
From 6pm on budget day, all tobacco product prices increased by 2% above inflation and hard rolling tobacco increased by an additional 1%.
New record base rate
The Bank of England (BoE) base rate is the official interest rate set by the Bank of England themselves. Banks and Building Societies use this base rate to calculate interest rates for their mortgages and savings offerings. If you are on a variable rate or a tracker mortgage then, should the base rate change, so could your monthly mortgage re-payments.
On 2 November the Bank of England increased the base rate by 0.25%, so from 0.25% to 0.50%.
In financial terms, unfortunately, 2017 didn’t bring the pot of gold that we hoped for. We hope that our summary didn’t bring too much doom and gloom. Let’s hope for a better 2018!