Statehouse 2008 predictions
– seven key trends
16 January 2008
Local independent financial advisors, Statehouse Financial Management, based at South Marston Park, Swindon, have predicted seven key trends for the year ahead.
Nick Cowen, managing director, Statehouse Financial Management said: “2008 will be a tough year, much tougher than people expect despite recent alarm bells. The impact of the sub-prime loans crisis in the USA has yet to fully wash over to our shores although we’ve had the first wave batter Northern Rock. No question, 2008 will see a credit squeeze which will have a knock-on effect for businesses and consumers.”
1. Employment Down
“Employment is set to fall but not abruptly. Employment levels have seen a fall in the US and, given the financial markets, a further bout of the jitters is likely.”
2. Bankruptcies Up
“Bankruptcies are set to rise during 2008, with the ‘junior version’, the Individual Voluntary Arrangement (IVA), set to rise more sharply to around 130,000 by the end of the year. IVAs only cover unsecured debt, as opposed to debts secured on property alone, and the anticipated rise fits in with the growth in loan and card debt.”
3. House Prices Down
“House prices have shown a marked slowing down in the last quarter of 2007. In November 2007, house prices had fallen by almost one per cent according to the average of the lenders’ indices. And the latest preview of the Royal Institution of Chartered Surveyors’ (RICS) survey has shown further decreases in the price balance. Price expectations were at their lowest since the series began in October 1998.
“The general feeling is that we are likely to see a monthly decline in value of around one per cent. This equates to a drop of around £2,000 on a £200,000 property per month. Experts have very mixed views on how long this will last.
“Commercial property prices have fallen since last summer, making it difficult to sell on. However, at some stage, there is likely to be a recovery, making it a desirable sector to get into.”
4. Interest Rates Down
“We have recently seen our first cut in rates for a year or so. The markets are expecting another possible cut in February. This is even more likely as this month saw no changes. Another cut is also likely to follow later in the year. The main fear at the Bank of England is that by lowering interest rates inflation will rise. The next report on inflation is due out on February 13. It is rumoured that American rates are set to be cut again. Euro Zone rates are being held for the foreseeable future on inflation worries.”
5. Prices Up
“Inflation in November 2007, the last month for which figures were available, was at 2.1 per cent, a welcome fall on the previous couple of months. However, with recent big rises in wholesale energy prices, big increases in household energy costs are on the way, which will feed directly into the inflation figures. These, in turn, will make cutting interest rates more difficult to justify. Rises in the price of oil also take their toll on the inflation rate, as increases feed through to petrol and, possibly more importantly, diesel prices. Almost everything that we use or consume is delivered by trucks, which use diesel fuel.”
6. £ Sterling Down
“Due to the recent cut in our interest rate the pound Sterling has suffered in the markets, notably against the Euro, but the pound is now worth significantly less than $2. The markets also look forward too, and the anticipated 2008 cuts in our interest rates are also starting to be factored in to the currency values.”
7. Precious Metals Up
“There is always gold at the end of the rainbow! Gold and platinum prices are at an all-time record and are set to continue while uncertainty exists in the financial markets.”
For more information visit www.statehousefinancialmanagement.co.uk 
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