Sunday Supplement 9 Nov 25 - Close Shave

“By sticking to our deficit reduction plans we can keep interest rates low. And it is, I think, hard to overstate the fundamental importance of low interest rates for an economy as indebted as ours... By sticking to our deficit reduction plans we can keep interest rates low.... Our plan to fix our broken economy takes each of these three problems head on. First, we have a clear plan to deal with the deficit. And it is fair. The richest 20% are making the greatest contribution to the deficit reduction and paying the most.” - David Cameron, 2013, encapsulating the link between fiscal policy (the Budget/deficit plans), fairness in contributions, and the resulting level of interest rates (monetary policy). This week’s quote pertains to the deep dive, as it often does, and I go deep into this week’s activity from the Bank of England and the accelerating budget speculation. As the calendar creeps towards a new year, it’s a natural time to pause and tackle the biggest challenges that keep small-to-medium enterprise (SME) property businesses from achieving true, sustainable growth. For most, this boils down to two core areas: Laying a bulletproof strategic plan for the next 12 months, and finally cracking the code on financial measurement and accountability. If you’ve ever felt lost in a sea of bookkeeping data, or if your productivity methods are falling short, it’s time to switch from doing to leading—and truly understand how your assets are performing. Book in on the next Property Business Workshop with myself and Rod Turner - Thursday 22nd January - Central London - https://tinyurl.com/pbwnine Trumpwatch kicks us off. The Government is still shut down in the US, and now consumer confidence is the next thing to slip. Trump has the usual appearance of really not caring, and hitting the “other side” where it hurts, initially starting from a position of withholding SNAP payments (the Supplemental Nutrition Assistance Program). Most still call them food stamps. C. 42 million low income Americans qualify for them (1 in 8 - God Bless America, right?). The shutdown has now surpassed its previous record. Most Americans are - according to polling - blaming the man in charge, which must rank as one of the least surprising conclusions of all. A district court order mandated that these payments instead MUST be made. The situation is still developing but the Trump administration has gone to the first circuit court of appeals to block the order, and then straight to the Supreme Court when they didn’t get the first answer that they wanted. That court order is currently temporarily frozen. Some states had acted very quickly Friday to follow the first court’s order before it could be frozen or blocked. The administrative stay placed by the Supreme court only lasts 48 hours. Savage stuff. FIFA also invented a peace prize, but I’m sure it has nothing to do with president Trump……after all, it isn’t what he calls “football”? There have been state and local elections as the calendar turns 1 year on President Trump’s election win. The election of the New York Mayor looked a formality on Polymarket, and sure enough it was (markets gave Mamdani a 98% chance of winning that election near the off). Don wasn’t happy as he holds Mamdani in the same regard that he holds the Mayor of London. The phrase on the left? The Trump Slump, referring to a poor economic record in charge - however, growth is good, unemployment is worsening but not as bad as it has in the UK, inflation is 3% so right at the top end of acceptable (and of course tariffs have done their bit here), and the stock market has hit new highs (recent events have been blow-offs rather than more increases though). Overall that’s more of a mixed picture but with the average American being pretty happy, to be honest. Shorter-term metrics OK, long term damage, the economists will argue. Tariffs continue to be the subject of argument. The debt/deficit situation is horrific, but ‘twas ever thus (although Trump/Bessent are not changing it/sorting it out). Fear indices and economic uncertainty is a concern going forward. The trade deficit has also narrowed a little, which is what was at the centre of all the trade negotiations - although Trump saw leverage, of course, for negotiation - and most would argue he’s wielded that fairly well. There are legal implications that will continue to show themselves, of course, but that’s - well - a typical day for Don. What else have we been hearing about - escalation against drug cartels, including missile strikes on vessels in the eastern Pacific and Caribbean. Be careful out there, folks. Trump describes the US as being actively involved in “armed conflict” with these cartels. This continues his war on fentanyl. As usual, the law is secondary to the decision to launch these strikes, and Congress has tried to get the Prez to seek explicit congressional authorisation here. That was defeated in the Senate. Debt has also been in the news. Growing at its fastest rate since 2000. $38tn surpassed in October. August saw the $37tn passed. This is just insane to watch in real time. $1tn in 71 days. Please bear in mind there is no crisis, emergency, or whatever buzzword anyone wants to use about reasoning behind gigantic federal spends/overspends. This math aint mathin’ for me! As always, it feels a bit safer when we turn our attention back across the pond. Watkin - smashed in a big Week 43 as we look at the real time UK property market. Listings printed 27.5k, down 1800 on last week, as the market continues the listing slowdown towards the end of the year. The average week 43 saw 29.1k homes listed - is the balance starting to redress a little, or perhaps I should say continuing to redress? It certainly seems so. It will be a slow process though and another clearout (at the end of the year) followed by the usual Boxing Day Action, will tell us where we are at. My “10% more stock than a normal market” ready reckoner continues to work on the back of circa 2 years of overperformance in listings compared to historical averages, and only a few weeks of us creeping back below those averages. There have been 1.53m homes listed this year so far! We are 9.1% ahead of the 9 year average, but that does include 2020 which pollutes the figures somewhat. We are really inching back towards the 2024 numbers now, week by week, having been 6-7% above them at various points in the year - but we are still listing more than we are selling (as always), so it is all eyes on the withdrawal rate as a general rule. We are only 1.5% ahead of the 2024 listings YTD now, but are still 9.1% ahead of the 2017-19 average. It is only one week, but we listed 7.8% fewer houses in week 40 than in week 40 of 2024, and very nearly the same number that we did in week 40 of 2023 (still well ahead of the pre-pandemic average listings for week 40, though). One week only - sure - but interestingly enough, the average price of what was listed in week 43 was UNDER £400k (compared to £432.2k in 2022 for the same week and £434.4k in 2024). The lowest for 4 years. Cheaper stock is selling, but are people also going for more realistic prices in the first place? Let’s keep an eye on it. Price reductions in week 43 - 18.3k - a decent drop from 21.3k last week and a fair gulf from the big numbers being reduced in 2025 in general. People are hunkering down for Xmas. September’s completed number was back to 14.1% for reductions - August’s 11.1% now looks a summer anomaly as the numbers came back to the 14.1% reduced in July, 14% reduced in June, in comparison to last year’s 12.1%, May’s 13.4%, and the 5-year average of 10.7%. 2025’s average is 13.2%. More stock, more reductions - absolutely and relatively. 23% more reductions than the 5 year average, if you take the difference between 13.2% and 10.7%. “25% more reduced properties than a normal market” also works as a ready reckoner, or is likely to even be an underestimate just because of the amount of stock out there. The 18.3k was lower than both 2023 and 2024, but interestingly, still higher than 2022 in what was a week where things had started to calm after the “lettuce storm”. 23.5k homes sold subject to contract, healthy enough. The 2025 average is 26.1k. Week 43s on average print 23.8k (over the past 9 years) - so we are there or thereabouts. SSTCs are up 4.2% year on year and 12.5% on 2017-19, and are now ahead of 2022 (we’ve passed the “day of the lettuce” and now into aftermath territory). With SSTCs up 5.1%, whereas listings now are only up 2.2% on last year, this signifies more “intention to transact” than 12 months ago, to this point in the year, for sure - or, put a different way, comparatively this looks like a more functional year than 2024 was (even though stock numbers have continued to rise throughout the year due to relentless listing). It’s the second best year for 9 years behind 2021 for Gross Sales. Week 43 of 2024 was more buoyant, but this was considerably better than week 43 of 2023 and also 2022, and nearly equivalent to week 43 in 2021. We went into October with 751,797 homes on the market - an increase of 15k on 1st September’s number. September is usually a rise in most years, so there’s nothing unusual here. We aren’t back to the peak of 763k in early August. Let’s see how October settled, and November started, when Chris has those numbers next week. It still feels like that 763k will be the cycle peak now. For context, as the market got stickier before the pandemic that number was c. 660k, a sellers’ market is more likely to be under 600k. At the end of September 2024, 723k were on the market. Ongoing figures will be interesting as we don’t watch the number of properties withdrawn from the market week-on-week. There were only 4% more properties on the market on October 1 2025 compared to October 1 2024, but the 2024 number was already the 8-year high. Chris also looks at the per square foot on sold STC properties. October’s sales agreed average was £338.38/psqft, up a whole 1% on September’s number. This arrested a three-month downward trend - strongly - and put us back where we were in August. September had seen a sqft pricing on sales agreed of £336.54 which was lower again - the previous numbers for context: August was at £338.78/sqft and that was 1.41% higher than August 2024 and 14.25% higher than August 2020 - but down 2.2% on June’s SSTC number of £346.45 and down 1.75% on July’s number of £344.78. This is a pretty dramatic drop and will start to play out in early 2026 numbers, when the figures hit the land reg, down into the 1.5%-2% region for 2025 (it isn’t quite an exact science, although these figures are the most helpful of all of them out there). A September slide, small as it was, on the back of August, is still 0.7% down. June to September saw a drop there of 2.9%, and whilst that doesn’t necessarily play out in the exact amount the market will drop by 5 months in advance, it does look like it will be a relatively tough Q1 as far as the land reg reporting will go. There’s still that 2.2% drop from June’s pricing to recover - but, that isn’t particularly unusual even if it is showing a bit more variance than expected. Also - a little maths here. Correlation doesn’t mean quantum is the same. So - if prices are up 1% in October according to this SSTC metric, it doesn’t necessarily filter through that the land reg is up 1%. The correlation here is strong (92% or so, Chris tells us) but the quantum may well be a shade lower (you certainly don’t see this sort of month to month variance in any of the indices whether it be Halifax, Nationwide or the ONS). One reason is the randomness of what’s sold and whether it was an expensive or cheap month - this past week saw much cheaper properties listed for example, as discussed, but it was only one week. Fall throughs were smack on the long-term average of 24.2% - still very little volatility around the long-term average for many weeks now. The net sales were OK - 18.2k, 3.6% up on last year-to-date and 9.5% higher than 2017-19 - now leapt above 2022 levels (more than 30,000 in front now). Week 43 9-year net sales average 17.9k, so ahead of that number still. I always give Chris a weekly shout out here because he’s more prolific than “just” this epic tome he releases weekly on the UK property market - he comes up with some great stats on a regular basis. Drop him a like, subscribe, and all the rest of it and some kind words for his content creation. If you are in the industry and want support in growing your business or to be a more effective communicator/be more in touch with your local market - that’s his core business - give him a shout. The article gets published on the Property Industry Eye website, and the video on his YouTube channel - @christopherwatkin

What’s in this week’s macro? Was it a macro-nap as the economy continued to lumber towards the budget? We had the final PMIs for all sectors; the Halifax House Price Index; there’s also a rare bit of room to look at the Economic Activity and Social Change in the UK report from the ONS and then - last up? Gilts and swaps, yes of course.

PMIs. I love ‘em. Real time insight on the economy. Not bad - indeed, very strongly correlated historically to economic performance. Not so good at predicting it when you have a Government policy-weakened private sector and a strong public sector - as we have had in the past (nearly) 18 months or so. Still - worth pressing on with. Manufacturing first - the final print was 49.7, after a flash of 49.6. Headlines - rising production (compared to September) despite weakness domestically and internationally. Output up for the first time in a year! Slower rates of contraction. The sort of chat you would expect from a print close to the baseline level of 50. Into the report from the S&P Director of Global Market Intelligence though - reporting real concerns that the bounce could be short-lived. The JLR restart (following the cyber-attack) was a false bounce, as it stands. Sluggish demand. Growth came from eating into order backlogs. Whatever happens in the budget, further increases in the minimum wage are coming - the current mid-range before it is settled is £12.71, a 50p or 4.1% increase. I would strongly suspect that this rise, currently below the market rise (closer to 5%), is more likely to be even higher - the range is £12.55 - £12.86 so £12.81 looks more likely to me! The market that predicted wage increases down to 3.75% - 4% by the end of the year looks hopeful at this point, and so I think something more in the 4.5%-5%+ region is more likely. Businesses are expecting this and are accordingly bearish! Business optimism is at an eight-month high but is still below its long term average - Rob Dobson closes by saying that businesses are waiting until domestic and geopolitical backdrops exhibit greater clarity. That might be a long old wait, Rob…… How about Construction, then? A horror headline I’m afraid - “Construction activity declines at fastest pace for over five years”. I’ve written extensively on this of late, not least 3 weeks ago when I analysed the Molior report and a whole slew of other pieces of evidence and research. The sub-straplines are equally mortal - speaking of steep reductions in housing and civils activity, staffing levels falling to the greatest extent since August 2020, and one small piece of cheer - input cost inflation moderating to a 12-month low. The print - 44.1, down from 46.2 in September. 10 months in a row below the 50 handle. Civils printed 35.4 (ugly!), resi at 43.6 (similarly ugly!) and commercial printed 46.3 to help the index - a similar figure to the September commercial property print. What did Tim Moore have to say - Economics Director at S&P? Another challenging month (no kidding). Why such reductions in workload? Risk aversion, and delay in decision making. I wonder why? Oh yes, the budget. The suggestion has been one of heightened political and economic uncertainty. On the bright side - there are more subcontractors available! Supplier performance also had a month of sustaining improvement. The fear is for the future - fragile investment sentiment, weak sales pipelines. Overall optimism levels were the highest since July as the prevailing sentiment is expecting lower borrowing costs, boosting demand projections. Services, and the Composite Index, then. Much more pleasing - “Solid Upturn in new work lifts service sector output in October”. Business activity and new order growth accelerating. Employment “close to stabilisation”! - and input price inflation at an 11-month low (very positive chat in all the PMI reports for the Bank of England MPC). Even better - it was once again a report where the flash number (51.1) actually ended up printing 52.3, at least twice as positive! This meant the composite printed 52.2 instead of the 51.1 that that also “flashed” at. We are “happy” officially when it prints 53+, as far as the private sector goes - but to move out of the mini doldrums of Q3, overall this has to be heralded as good news and growth seems to go on in spite of the “best” efforts of some of the current Government policies. This sort of number would be congruent with a 0.2% (ish) growth per quarter, from a private sector perspective, in line with historical data and correlation. Again it is over to Tim Moore for the commentary, and overall it was very positive - new client wins, resilient domestic demand, job cuts slowing considerably (note - not over, but slowing considerably) - business confidence at a 12-month high - and alongside the great news around input inflation, output inflation was increasing at the slowest rate since June. Certain parts of the services industry will still be living in fear of the national minimum wage increase in April, once more - but a relatively small percentage (compared to manufacturing, for example). Once more the final PMIs exceeded the flash numbers when there had been a tick upwards. If we print in the 52ish handle territory for November, that’s a great result - and indeed it is possible. Very little reference to budget concerns in business - business has worked out, as it does, that the people being hit this time round are the people - everyone - with whatever tax threshold squeezing and subbing national insurance for income tax jiggery-pokery that’s about to go on, so that “working people” are not going to be paying more tax (if you accept a very convoluted set of circumstances, which no-one will).

Halifax, then. Once again the consensus was confounded (they really are not very good at predicting the Halifax House Price Index, but month to month there is significant variance to be fair). Consensus said 0.1%. My LinkedIn polling said similar. Instead, the index moved forward 0.6% for October 2025. September was -0.3% but again that was largely in line with the Watkin real time analysis when it came to ££££/sqft pricing.

Annually that puts things at +1.9%, which is where my range for the year is now sitting - between 1.5% and 2%. Halifax also mentioned resilient demand - with mortgage approvals at their highest level this year (although it is very tight month to month, really, since things have settled down after the re-introduction of the 125k SDLT band). Northern Ireland pressed on and was up 8% year-on-year, with slight price falls in London (-0.3%) and the South East (-0.1%). In England the North East prevails at +4.1%, but Scotland got its nose in front at +4.4%. A record high was hit overall after this climb, with Halifax’s average price (higher than both Nationwide and the ONS) up to £299,862 - nearly there, brace yourselves for those headlines when we hit £300k at Halifax folks! As usual, there’s room for the usual caveats around affordability generally - “slowly improving”. Surprisingly good data (to the bears, anyway) from Halifax this month. How about the weekly publication from the ONS that I look at on occasion: Economic and Social change indicators? It looks back over recent weeks and months. One interesting stat - electric cars represented more than 50% of new car registrations in September 2025. That single stat alone might be why it is time (according to the rumours and leaks from the Treasury) to stop incentivizing EVs - either by introducing this 3p/mile tax that has been talked about, or by ensuring EVs pay congestion charge - or by a combination of other things. At that sort of level of penetration though, withdrawing subsidy makes perfect sense - changing the shape of the tax system is a different conversation. The number was 54%, and 12 months before it was 44%. That 54% counts battery electric, PHEV, and hybrids - solely battery was 23% of the total. In January 2020, the percentages were: 25.5% Diesel, 62.3% Petrol, 12.2% EV - in September 2025, the percentages were 4.3% Diesel, 41.7% Petrol, 54% EV as per the above and the trend is very clear (still plenty of demand for “new petrol”, though). The scale of the JLR cyber attack became clear - it wasn’t responsible alone for this but 24% fewer vehicles were produced in September 2025 than August 2025. UK retail footfall was down 8% compared to the equivalent week the year before (don’t compare too much on the basis of one week, though!) - retail footfall was still about 6% higher than it was in mid-2024. The system prices of gas and electricity were 26% and 28% cheaper than they were in 2024 (and yet bills? Still up……). The average direct debit transaction is still only 7% higher than the beginning of 2023, despite inflation in the interim - people have switched to cheaper alternatives or participated in more, smaller transactions. In the same period debit card spending is up 13% or so. The other data contained in this report shows redundancies stabilising after a reasonable peak since 2023, far fewer online job adverts as we know, an increase in new VAT reporters of 9.5% since the beginning of 2023, automotive fuel 8% cheaper than 1/1/23, and renter affordability - the percentage of income spent on rent - at 29.7%, which is high but underneath the 30% threshold that the ONS sets (versus the 33.3% that the industry tends to use, whereas some use 40% and London uses 50% as the high watermark). Feeling Gilty for not paying enough attention to the bond markets? Have no fear. The 5y had an up-week in terms of yields, opening at 3.888% and closing at 3.933%. Those 4.5 basis points or so were a casual drift upwards with 3.95% and above being tested on Friday afternoon. It wasn’t immediately obvious why that move happened, but it was very small so it is not worth spending too much time on! Thursday’s close around the 3.9% handle was equivalent to a swap market close at 3.574% on the 5-year which stacks up well compared to 3.795% one month ago and 4.01% one year ago, which was a week and a bit after the budget of 2024. The 30y followed a very similar pattern - open at 5.181% which looked much more sensible in general but still good value for fixed income investors, and close at 5.252%. That was a 7 basis point rise and so the yield curve steepness went up last week rather than down, and back above the 5.25% handle we go. The range for the 5-year at 3.75% to 4.25%, which has been my viewpoint for around 18 months now, is still holding up reasonably well as “fair trading range” - the 30-year I find much more difficult to explain (for good reason - it is harder being 6 times a longer duration than the 5 year, and the 5 year is difficult enough and has spent plenty of time in the past 12 months outside of my “acceptable range”!). The 3-year UK at 3.649% and the 1-year at 3.623% are both a huge gap down from 12 months ago - the 2-year looks a little anomalous but the steepness starts at 3 years and so the 5-year is a bit chunkier and lumpier. The overnight swap curves predict a bank rate of 3.43% in 12 months’ time - I’m still above this as I still believe we will struggle after we finally get below 4% (having already struggled to break that 4% and broken the “cycle” in this most recent Bank of England meeting). A seamless segue there into the decision to hold the rates at the Monetary Policy Committee Meeting this week, then! The “pattern interrupt” was that for the last 5 meetings before this one that had been accompanied by a revised forecast (it is only updated once per quarter) the rate had been cut. August 2024, November 2024, February 2025, May 2025, August 2025. From 5.25% to 4%, 0.25% cut each time. Quick review of schools of thought. The rate being above a “natural rate” (the smart people think that is 3.5%, I think that is more like 4%) keeps a lid on the economy. It makes it harder to grow. It makes capital more expensive than it would otherwise be. In the ideal world you could be around the natural rate, because the economy is functioning properly and not reeling from shocks (the most recent genuine shock was the increase in employers’ National Insurance in the budget last year). You need to be below that natural rate if there are economic “issues” that need intervention and attention. Arguably - there currently aren’t. There are these self-inflicted issues such as employers’ NI but ultimately - the PMIs are doing OK (construction aside). That doesn’t need intervention at the macro level - it needs something more targeted (indeed, I have been tipped off that Help to Buy is coming back at the next budget, for new build units only, with a new name - let’s see how good my source is!). So - the overall expectation throughout this year from many commentators was a cut in November. They switched their consensus cut forecast to December, which makes sense based on the timing of the budget. Even though the Bank won’t be operating from a new forecast - they WILL be operating on the basis of how inflationary, or not, this budget is deemed to be. A little segue on that front. I’ve not seen anyone take this sort of approach anywhere else. I can understand the educated opinion that this is about how “good or bad” this budget is, but I think that’s unnecessarily partisan. Who gets hit - which, as discussed above, is “the people” for this one, for sure - is not really our concern. How inflationary, or disinflationary, the likely budget will be - IS much more interesting when considering the future path of the interest rate. So - what do we know? There’s a need between £20bn and £50bn in terms of a hole to plug, mostly based on what will be a revision downwards in productivity and also lower growth than the OBR thought we were getting (although it has held up better than many commentators predicted). What are we looking at? VAT rises, if we were to see one proposed restructure to VAT being levied at 30k turnover rather than 90k turnover, would be seriously inflationary on their own, adding 0.7% to 1% to CPI (according to much of the prevailing research around this). That would hurt a lot, and that’s why there’s no real way that can be on the agenda at this time (even if the 30k threshold makes some sense in the medium term, and is much more in line with many other Western developed economies). That most definitely wouldn’t see rates coming down, but is also a reason why it isn’t happening this time out. On the other hand, taxing income and hitting people in the pocket is actively disinflationary. It makes macroeconomic sense, but is a difficult “sell” of course, especially with the manifesto commitment (technically broken already, but the people don’t “feel” it is broken) being “not to raise tax on working people”. The rumour that has gained traction now is 2p on income tax, with 2p being cut from Employee National Insurance. From a fairness perspective - the whole of Employee’s NI should be scrapped. It should ALL be on income tax. This hurts landlords (sorry folks) who own assets in their personal name - it also hurts pensioners (or on the flip side, gets pensioners with larger incomes, such as those sitting on utterly unsustainable final salary pensions, which STILL hasn’t been addressed adequately in the public sector, to pay as much as they would if they were still employed - which simply MUST be deemed inherently fair, surely?). It is symptomatic of this Government to tweak rather than do something proper. The one cast-iron guarantee is to extend the fiscal drag period out to 2030 from 2028 - by freezing the income tax thresholds. This might raise £10bn or so, and is such an easy win since tax “doesn’t go up” - inflation does the work. The rest of the taxes mentioned won’t raise a huge amount and will be more political than anything. Tweak IHT - threshold down to 100k from 325k + 175k in your personal home, make the potentially exempt transfer period 10 years or more rather than 7 years, tweaking CGT and the likes. Addressing pension relief might be helpful - a fixed rate for relief at 25% or 28% would be inherently “fair”. Lowering the ISA allowance would also help a lot, and I don’t buy a single penny of this “incentivising the wrong behaviour” - people saving over 5k per year in a cash ISA are not going to be reliant on the state when they get older because they are preparing themselves properly - they just have an unnecessarily generous tax avoidance measure at their disposal. Easy game then, really? Income tax increases are disinflationary, so put them in to help control inflation and get rates down? Well, there’s a downside - of course (this is economics). It depresses demand because it takes money out of people’s pockets. Consumption is the single largest driver of economic growth in the UK - people consume less, growth is lower. Growth is lower, tax revenue growth is lower - black holes (terrible choice of phrase, wonder how much Rachel regrets it now) pop up again and again as forecasts get revised downwards. No free lunches, folks. You’d have to persuade the OBR that this simply addresses a savings ratio which we, as a country, can’t currently “afford” - in September we published the Q2 savings ratio at 10.7%, which was up from the Q1 figure at 10.5%. 5% would be “sufficient” - so in theory, if we can either tease money out of the pockets, or disincentivize savings, we have some rope there to get the best of both worlds. Still. £10bn from the threshold freeze. A mere £6bn from the “two-up two-down” - not our usual two up two down fare, note - 2% on income tax, 2% off national insurance. £16bn sorted. A billion or two from a council tax restructure on expensive property - something Labour can ideologically get behind. Cuts are also likely to be politically popular and are “coming” with Pat McFadden in the DWP - in my view - but would also change very little on inflation and actually mean a reduction in demand (those on benefits tend to spend almost all or all of what they are given, because aside from anything else they are incentivized to keep savings down because of the “Rules of the game”, but also those on lower incomes have what we call a “marginal propensity to consume” - how much of every extra £1 that you get given that you spend - of 100% or even higher as you become more creditworthy). That could impact growth (as it is measured) - but not materially if the cuts are only to the tune of £5bn - £6bn as has been suggested. OK - so that’s covered budget predictions at a high level, to an extent, whilst trying to answer the question about whether interest rates go down in December or not. As usual, the resounding answer is “it depends” but it likely depends more on what revisions downwards there are going to be in growth predictions on the basis that the Treasury will be sensible about how the budget will affect the interest rate in the medium term. I honestly hold the belief that I could get the long term gilt yields down 1% or so “fairly easily” if I was in charge, and had a mandate to strongly influence the Bank of England - simply addressing the way quantitative tightening has been done alongside giving the bond markets more long-term confidence in the future of the UK. Could be nonsense, of course, and is immaterial - I’m not standing anytime soon……and my pragmatic nature would not be welcomed because ultimately everyone would bear a bit of the burden as I fixed the nation’s finances! How about the actual MPC report and the meeting? The vote was 5-4 to hold, with the other 4 wanting to lower the rate by 0.25%. I predicted 6-3, so not a million miles off, but not correct. It does show just how finely everything is in the balance at the moment. A vote either way would have been fair enough, I think, although I believe the best conclusion for the country at this time has been come to by the MPC on this one. But - I believe they should probably hold the rate in December, depending on what the budget says of course. What does the Committee think? Inflation has peaked (the surprise print in September below the expected peak is enough for them to say that). That’s a risky viewpoint this close to the release of the data, in my opinion, but they are probably right. They see inflation at 3% early next year (sounds hopeful with core at 3.5%, in my view, but there we go) and then in 2027 back to 2% (still dreamland in my view, and if we went back 12 months, they would have been predicting that about 2026 and that won’t be happening in my view). They talk of future cuts if disinflation progress continues. In honesty it has been slow - slower than expected - and of course impacted by the inflationary nature of the last budget. Their growth predictions are up, overall, since the last policy report and they think that 1.8% will still be the growth rate at the end of the forecast period. I wonder how far the OBR are going to drift away from this - for what it is worth, I still believe 2%+ is possible for the UK but it would need some actual sensible policy and regulation cutting, rather than just talking about it whilst NOT doing it! They have inflation at 2.5% by the end of 2026 - possible but unlikely, I would file that under - I am much more at the 3% sort of level for 12 months time that the average business and consumer are predicting. Then conveniently they are back at 2% by the end of 2027, but at 2.1% at the end of the forecast period. That’s why rates COULDN’T be cut last time out, in my view - and that forecast is contingent on the rates doing what the market expects - a cut in December or February, and one more at some point next year - and then rates settling around 3.5% or 3.25% possibly. They see unemployment at 5% by the end of this year - the better noises in the PMIs suggest that this might be too bearish these days, but we need to see the budget and another quarter of PMIs to really gain confidence in that, with 5% being the new normal for the next few years dropping to only 4.7% in 3 years time. Not a lot of confidence in this Government to truly create jobs, then. They see the economy with increased spare capacity (excess supply, from a technical perspective) - which we could get on board with - which is disinflationary but also inefficient. They see this working out by the end of 2028, which looks wonderfully hopeful. Their projection for the Bank rate is that it bottoms at 3.5% next year and stays there or thereabouts before the next move being potentially upwards in 2028 (this would be if the economy was heating up and needed a touch of cooling, plenty of which it has had since 2022!). Inflation is all the fault of labour costs (Rachel……) and food price inflation which isn’t just about the cost of delivery (although it hasn’t helped), according to the Bank (and to an extent, the ONS analysis as well of course). Annual private sector wage growth (ignoring public sector here, which isn’t macro-correct, of course) is down to 4.4% in the 3-months to August, so that’s where we are. Below the triple lock, I note….. Short term household inflation expectations remain around 4%, which isn’t far off, and also becomes a self-fulfilling prophecy. The Bank has Q3 growth at 0.1% and Q4 at 0.2%, which won’t be far off at this rate - although since they have mostly already happened, and we are more than 30% into Q4, you’d expect those forecasts to be pretty good! Getting the savings rate down - as I referred to above - would also be helped by cutting rates, of course. The Bank notes the V/U level, which they like (vacancies versus number of unemployed) being “further below its estimated equilibrium level” - which is correct, ultimately because vacancies have fallen for 39 months on the spin, and unemployment has rocketed since the 2024 budget. The Bank also looks at margin in firms - ultimately, margins are lower than Q4 2019. Post-pandemic, I have written many times about how the fact that labour tends to win the arm-wrestle over capital in coming years - the problem is that enhanced inflation, another near-guarantee of a post-pandemic period, takes money out of everyone’s pockets. There’s also much more of my sort of chat in the report, hidden in boxes B and C of the report - elevated inflation expectations could cause inflation to remain persistently high. Hello folks - already been happening, already happened, and simply won’t NOT continue. Transitory, my bottom. They speak of structural labour market changes which are symptomatic of a post-pandemic period - lower participation rates (with multiple reasons, one of them being an overly generous welfare system if you are willing to work it to your own needs) is one factor. I just want to pause there and put a bit more effort in than the Bank did, and also say what they can’t. Here’s where we are. Inflation-linked benefits are going up 3.8% next year. Tax thresholds are frozen - there is active fiscal drag, at least until 2028, probably until 2030 when we see the budget. Benefits are not “income”, they are not taxed at an income tax rate. As the minimum wage continues to rise, it is now halfway (basically) to the higher rate tax threshold. Marginal increases in income lose 28% to PAYE - currently - 20% income tax, 8% employee NI. To keep the numbers easily processable - a full-timer on minimum wage with no other income gets 50% of their income without tax, thanks to the personal allowance and employee NI allowance thresholds - and the other 50% at the marginal rate of 28%. So, they pay about 14% income tax. Add 4% (for next year’s rise - likely larger, as I said). That’s another £1k per year. You see £720. Your income goes from £25k gross, £21.5k net to £26k gross, £22.2k net. If you get 4% more on benefits and get the benefits cap already - £22,020 (you would need to have one child at least) - then 4% on that is an extra £900 a year, rather than £720. The point of that little bit of mathematical gymnastics is to show you and make you think about the fact that the averages have changed and the incentives have changed - slowly - in the wrong direction since inflation has been high. On average, benefits claimants are 25% better off, after tax, simply because of inflation, versus a working person on minimum wage. Show me the incentive, and I will show you the outcome, Charlie Munger said - a wise, wise man. Why do you think our figures are so far out of kilter since the pandemic compared to all of the other Western economies - higher levels of sickness, higher levels of claiming generous allowances, a million people claiming all 4 levels of Personal Independence Payment…….the Government do get this, they just need to persuade their own party (I know, right) to have the difficult conversation and do the right thing. The soapbox - perfectly justified in my view - is where I will finish for this week. Slow change - just as inflation brings about - is some of the hardest for the Government to change because there is no trigger event (there are also a limited number of people who sympathise with and understand this argument enough inside the Labour party in my view, but that’s a more political bent). Now - as I draw this week to a close, the next Property Business Workshop is prepared. As we turn our eyes to 2026, the next slot is online and available! We start the year with a bang, discussing strategic planning and how to make the most of the next 12 months, with some of our own methods and takes on productivity and time management, alongside systems and processes. The other half of the workshop is about the most common pain point in SME property businesses - accounts, bookkeeping and group accounting. This is about measuring asset performance - not “how to use Xero”, but “how to make the most out of financial information” - what should you be seeing monthly, and how should you interpret it properly and use it strategically to grow your business, safely but quickly? SUPER EARLY BIRD tickets are available with a genuine 20%+ discount off the face value. As always we have real life case studies about our own experiences, and close with our “no-holds-barred” Q+A. Anything individual to consider? Get a VIP ticket and join us for dinner, in a smaller setting with an opportunity to discuss any specific roadblocks or issues in your property business at the moment. That’s the best way to get a substantial conversation with myself, Rod and other experienced Property Business people! Join us! Thursday 22nd January 2026, Central London; https://tinyurl.com/pbwnine Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On. There will be opportunities abound this year and towards 2030 and beyond - the landscape has been set for a surefire bull run. It will be slow(ish), and take a little while longer to get off the ground - and the amount of stock around is still keeping things suppressed at the moment - but as the market continues to improve slowly, it is a case of “here we go” in my opinion.

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