Weekly Round-Up, 22/06/2018
No Change 6, Change 3
At its meeting ending on 20 June 2018, the Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6-3 to maintain Bank Rate at 0.5%. In the MPC’s most recent projections, set out in the May Inflation Report, GDP was expected to grow by around 1¾% per year on average over the forecast.
A key assumption in the MPC’s May projections was that the dip in output growth in the first quarter would prove temporary, with momentum recovering in the second quarter. This judgement appears broadly on track. A number of indicators of household spending and sentiment have bounced back strongly from what appeared to be erratic weakness in Q1, in part related to the adverse weather. Employment growth has remained solid. Although manufacturing output recorded a decline in April, and this was accompanied by a fall in goods exports. More broadly, the prospects for global GDP growth remain strong, and while financial conditions have tightened somewhat, they continue to be accommodative.
Consumer Price Inflation was 2.4% in May, unchanged from April. According to the Committee, inflation is expected to pick up by slightly more than projected in May in the near term, reflecting higher dollar oil prices and a weaker sterling exchange rate. Most indicators of pay growth have picked up over the past year and the labour market remains tight, suggesting that domestic cost pressures will continue to firm gradually, as expected.
The Committee’s best collective judgement remained that, were the economy to develop broadly in line with the May Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon. For the majority of members, an increase in Bank Rate was not required at this meeting. All members agreed that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.
The Ministry of Housing, Communities and Local Government has published new guidelines which aim to protect tenants from poor living conditions. Following the announced legislation on HMO minimum room size last month, any landlord who lets a property to five or more people from two or more separate households, must be licensed by their local housing authority.
The move, affecting around 160,000 houses in multiple occupation (HMOs), will mean councils can take further action to crack down on the small minority of landlords renting out sub-standard and overcrowded homes. Landlords will also be required to adhere to council refuse schemes, to reduce problems with rubbish. The guidance document includes further details on extending mandatory licensing to smaller HMOs and introducing minimum bedroom sizes as the Government continues to rebalance the relationship between tenants and landlords.
These new guidelines have also come alongside a government announcement reviewing how well selective licensing is working and how it is being used by councils. In areas where selective licensing has been implemented, landlords must apply for a licence to rent out a property. In doing this, councils can decide whether a landlord is a ‘fit and proper person’ using varying criteria. The licence fees are also an issue as landlords may need to pass these costs onto their tenants, which will place a greater burden on the most vulnerable people in the private rented sector (PRS).
The proportion of UK employees who say they will work beyond the age of 65 has remained at three-quarters (72%) for the second year running, significantly higher than in 2016 (67%) and 2015 (61%), according to the latest research from Canada Life. Nearly half (47%) of those who say they expect to work beyond 65 will be older than 70 before they retire, up from 37% in 2017, while almost a fifth (17%) expect to be older than 75. Workers aged 35-44 are most likely to say they expect to retire after their 75th birthday (27%).
A series of economic factors are driving employees to work for longer. Nine in 10 (90%) UK employees say that the rising cost of living is the main reason why they expect to work beyond 65 with 87% saying the same of poor returns on savings due to low interest rates, with consumers still yet to see last November’s interest rate rise passed on3, and 86% of employees point towards inflation. Opinions remain divided about the UK’s ageing workforce as it brings a new set of challenges for workers to contend with. Over a third (36%) believe that an ageing workforce might mean that older workers will have to re-train or learn new skills to stay in work, while three in ten (30%) think it could make it harder for young people to move up the career ladder. But more than two fifths (41%) are positive that a mix of older and younger employees creates a workforce with a wider range of skills, which is beneficial for employees and employers alike.
This comes as just 6% think the government is helping to promote older workers however, down from one in ten (11%) following last year’s announcement of an increase in the state pension age.4 So far, only 13% think that employers are encouraging older employees to stay in the workplace, and little more than a sixth (15%) believe that older people are appreciated and respected in the working environment. Support for older workers in the workplace can come in many different forms, but often the simplest are the most effective. Nearly half of employees (45%) think flexible working or part time opportunities are most important when it comes to supporting an ageing workforce. Out of those planning to work beyond state pension age, 60% say that they would be more likely to work for an employer that offered health and wellbeing benefits.
Couples, Families and Singletons
The stereotype of students seeking out a chaotic existence in a communal house no longer typifies those renting a home from a private landlord, according to research from Nationwide – in fact they are more likely to be couples (47%), families (11%) or those living alone (30%), rather than young people living with university friends (7%). More than a third of men surveyed (35%) rent a home alone, compared to one in four (25%) women, with lack of affordability or a change in life circumstances most likely to be the cause.
The YouGov survey of more than 2,000 tenants renting from a private landlord provides a broad snapshot of diverse experiences and expectations depending on age, life stage, route to renting and location – as well as highlighting many everyday realities for renters across the UK. For almost half (46%) of those surveyed, their main reason for renting was that they could not afford to buy. However, for more than one in ten (11%) a change in circumstances, such as the breakdown of a relationship, leaves them renting – and the likelihood of this grows with age, with 15 per cent of over 55s citing this as their main reason for renting. Having to leave a previous home (6%) and lack of social housing (4%) also feature – while others rent because of the flexibility it provides (6%) or to have easier access to their work (5%). While more than three quarters (78%) of those surveyed, renting flats or houses, rent the whole property, one in five (19%) just rent a room – though this figure rises to more than a third (36%) of those renting in London, likely due to both affordability and availability.
Once in, UK tenants renting from a private landlord stay an average of four years and two months, though almost one in three (31%) stay for five years or more and one in eight (13%) stay for a decade or more – rising to almost one in five (19%) of those renting on their own. One in five (20%) of those staying put for a decade or more are 45-54 year olds and more than one in four (28%) are 55 plus. According to the study, the older the tenant, the longer they seem to stay, with average length of tenancy duration for 18-24 year olds at just over a year, 25-34 year olds at two years four months, 35-44 year olds at four years five months, 45-54 year olds at five years eight months and those 55+ staying six years nine months in the same home.
The average UK monthly rent is £562.05, though one in seven (14%) pay more than £800. After paying for food, rent and bills, the average Brit has £314.45 monthly disposable income left – though men are left, on average, more than one hundred pounds better off than women (£372.84 v £264.69).