Report on Q4 2024

The UK indices fell by 1-2% in Q4. If the stock market is a reflection of how investors feel about the UK’s economic prospects, it is not a very pretty sight.

Over the year the FTSE 100 rose by 5.6%, the All Share by 5.5% and the FTSE 250 by 4.7%.

The UK ten year gilt yield rose from 4.1% to 4.6%, implying lingering worries about inflation and meaning that the cost of servicing the UKs vast debt is likely to be as uncomfortable as ever. I have noticed that my stockbroker is now offering me direct access to government debt issues. From memory, the last time this was done was in the 1990s. This is welcome to me but also carries a faint whiff of desperation.

The rise in US ten year government bond yields matched those of the UK (4.0% to 4.55%) while other European yields rose more gently. German ten year yields, at 2.35% (from 2.2%) suggest that investors in Europe are more worried about low growth than inflation. 

A number of UK companies made cautious comments about their prospects, typically allocating some blame to the now notorious budget effort by the UK Chancellor Rachel Reeves. In particular retailers are dismayed by the rise in employers’ NI contributions as well as the expected increase in minimum wage. My portfolio suffered warnings from Shoe Zone, Kingfisher and Pets At Home.

Shoe Zone (18 December)

Consumer confidence has weakened further following the Government’s budget in October 2024, and as a result of this budget, the Company will also incur  significant additional costs due to the increases in National Insurance and the National Living Wage. These additional costs have resulted in the planned closure of a number of stores that have now become unviable. The combination of the above will have a significant impact on our full year figures

Kingfisher (25 November)

Solid underlying trading in August and September; weak market and consumer in the UK and France in October, impacted by uncertainty related to government budgets in both countries

Pets At Home (27 November)

In the October Budget, the government announced planned changes to the National Living Wage and employers National Insurance Contributions. Combined these changes represent a £18m cost increase for our business in FY26. 

In each case I believe that there are some less than Ideal management decisions to claim a contribution but this is not a moral exercise – I would rather that my mediocrely run companies were not further burdened by political incompetence.