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December 2023 monthly update

Read our December monthly update – a roundup of the latest financial news and economic headlines.

UK and Switzerland sign financial services deal

After three years of deliberation, the UK and Switzerland have come to an agreement to recognise each other’s financial laws and regulations. It is hoped that this will ease post-Brexit market access for banks, insurers, asset managers, and other firms. Chancellor of the Exchequer Jeremy Hunt and Karin Keller-Sutter, his Swiss counterpart, signed the deal in Bern on 21 December 2023.[1]

The negotiations with Switzerland were started by Prime Minister Rishi Sunak in 2020, when he was still Chancellor, and he claimed that such a treaty would showcase a mutual vision of an “open, global and free” economy.[2]

The Treasury echoed this sentiment with a statement that announced: “the Bern Financial Services Agreement is only possible due to new freedoms granted to the UK following its exit from the EU.” It also claimed that “the agreement will enhance the UK and Switzerland’s already thriving financial services relationship.”[3]

Despite the UK losing access to the EU’s single market, the government hopes that this deal will provide a much-needed economic boost to the City of London as Switzerland, which is not a member of the EU nor the EEA, is part of the single market.[4] Switzerland’s former trade arrangements with the UK were based on EU regulations and so, Britain was at risk of being downgraded to the status of a third country when it left the trading bloc. This would have given the country extremely limited access rights to European economies.[5]

The Chancellor insisted that the treaty “builds on the UK and Switzerland’s strengths as two of the world’s largest financial centres” and that it will serve as a “blueprint for future agreements with other key trading partners.”[6]

While London is well-known for its broad range of financial activity, a recent study by the City of London Corporation found that “other financial centres [are] growing faster”. Moreover, the study ranked the capital second to New York even though the city has already signed an accord with its American rival. Singapore, Frankfurt, and Paris were further named as financial hubs that are making large gains in the sector at Britain’s expense.[7]

Switzerland has a reputation for being the largest centre for offshore wealth with its banks managing an estimated $2.4tn worth of assets on behalf of the world’s most wealthy people (reported by Boston Consulting Group). It is also the UK’s third largest non-EU trading partner after China and the USA.[8] However, after the collapse of Credit Suisse, Switzerland’s second largest bank, and its subsequent need to be rescued through a merger with its rival UBS, the central European country has suffered a blow to its prestige. Due to this, analysts believe it is difficult to accurately assess the impact of the treaty since it is as much about supporting existing business as building routes to a greater relationship.[9]

“We don’t have any details of the agreement and that makes it very difficult to assess its impact,” said David Henig, UK director at the European Centre for International Political Economy, “It is possible that it goes beyond the equivalence agreement that the EU has with Switzerland, but again, without knowing the detail, it is hard to judge.”[10] He did, however, agree that the deal was “broadly good news” since it exploits the UK’s global weight in the financial services industry.[11]

Paul Blomfield, Labour MP and co-convenor of the crossbench UK Trade and Business Commission, praised the treaty as a “welcome acknowledgement” from the government that it must provide regulatory certainty. He also said that it will be “well received across the City [of London]”. He did, however, warn that there was still a lot more to be done in removing Brexit red tape and the wider barriers that British companies are still struggling with.[12]

UK inflation falls to 3.9%

Britain’s inflation has rapidly fallen again this month to 3.9%. This is far below the previously predicted figure of 4.4% (gathered from economists who took part in a poll held by Reuters). According to the Office for National Statistics (ONS), 3.9% is the lowest rate since September 2021 and the drop seems to have been driven by lower petrol, food, and leisure prices. The news has fuelled speculation about when the Bank of England (BoE) will finally reduce interest rates from their 15-year high.[13]

The BoE have stated that it is still too early to consider lowering interest rates but the Guardian reports that the markets believe Britain’s central bank will deliver at least four rate cuts during 2024. Analysts forecast that the BoE will begin to ease its hawkish stance on the policy in the spring of 2024 since the economy weakened in response to the 14 continuous interest rate increases between December 2021 and August 2023.[14] The markets expect a 0.25% cut by May 2024 and for the rates to continue falling by 1.38% total; a more optimistic view compared to the only 1.07% decline that was estimated in early December.[15]

“Another significant drop in inflation in November only adds to the case that interest rates will fall sooner than expected. […] price rises appear on a rapid decline back towards the Bank’s target range and it may soon be that the risk for rate-setters is not under-tightening but over-tightening.” Said Ed Monk, associate director at Fidelity International.[16]

In contrast, Seema Shah, chief global strategist at Principal Asset Management, warned that the market’s expectations of deep rate cuts seemed to be a “knee-jerk” reaction since the figures only amount to “one data point and the BoE need a string of them”.[17]

The BoE’s Monetary Policy Committee voted (6 to 3) to maintain its 5.25% rate on 14 December 2023. The three dissenting members argued for a further 25 basis point rise to 5.5%.[18] The Committee stated that its policy is “likely to need to be restrictive for an extended period of time.”[19] Policymakers wish to wait for conclusive evidence in the labour market that they have done enough to return the inflation rate to their target of 2%.

Month on month, the headline CPI decreased by increments of 0.2% – surprising economists who had predicted a 0.1% increase. As such, the core inflation CPI (a figure which does not include food, energy, alcohol, or tobacco prices) has been revealed to be 5.1% instead of the projected 5.6%.[20]

This has resulted in a drastic fall in bond yields with the yield on the UK 10-year government bond sinking to an eight-month low. It dropped 11 basis points to 3.54% since yields move inversely to prices. Furthermore, the FTSE 100 was the sole major European stock index to be in positive figures on 20 December 2023 as it rose to 0.8%.[21] The pound sterling also fell by 0.5% against the dollar to $1.266.[22]

According to the ONS, cheaper fuel is the reason why prices fell by 0.2% this November compared to how they rose by 0.4% in November 2022. The average price of petrol fell by 4p/Litre month on month and, therefore, caused the headline CPI to also fall. Furthermore, food prices were rising more slowly with this being especially true of bread and cakes; they actually decreased in price. Overall, the price of food rose by 0.3% month on month and they are still up by 9.2% annually (compared with a rate of 10.1% in October 2023).[23] Although the cost of food and non-alcoholic beverages rose by 9% overall in the decade between November 2011 and November 2021, the ONS reports that it rose most steeply by 27% in the past two years.[24]

Chancellor of the Exchequer Jeremy Hunt lauded the recent figures and claimed that the UK is “starting to remove inflationary pressures from the economy” and that it is “back on the path to healthy, sustainable growth” alongside the business tax cuts announced in the Autumn Statement.[25] This also means that Prime Minister Rishi Sunak can celebrate achieving his goal of halving inflation even if the current 3.9% statistic is almost double the 2% target set by the government.[26]

The Chancellor did concede that “many families are still struggling with high prices so we will continue to prioritise measures that help with cost-of-living pressures.”[27]

Richard Carter, head of fixed interest research at Quilter Cheviot, noted that the wider economic picture remains “complex, marred by stagnation and subdued growth prospects” despite the decrease in CPI. The economy contracted by 0.3% month on month in October after flatlining in the third quarter of the year. Consequently, he believes that is a sign of “an economy struggling to rebound from a series of unprecedented challenges.”[28]

While the slowing pace of inflation offers some semblance of hope to households, Carter cites “the cost-of-living crisis, volatile energy markets, Brexit aftershocks, […] enduring productivity issues” as just some reasons as to why Britain’s economic prospects and consumer confidence have been dampened.[29]

Chancellor announces 2024 Spring Budget date, fuelling speculation about tax cuts and mortgages

Chancellor Jeremy Hunt has announced that the Spring Budget will be delivered on 6 March 2024. This is likely to be the last major financial statement by the government before the upcoming general election. As such, the announcement has fuelled reports and speculation about the measures Hunt could possibly introduce in the Spring Budget in an effort to sway voters away from the Labour Party; who currently lead in polls by a margin of 20%.[30]

The Financial Times reports that tax cuts are expected before a possible early election date in May. Downing Street insiders, however, have stated that Prime Minister Rishi Sunak is more likely to call for a general election in the autumn. One insider, speaking to the Financial Times, said: “it will give more time for lower inflation, tax cuts and — hopefully — lower interest rates to feed through.”[31] Latest GDP (gross domestic product) figures show that the UK’s economy is flatlining, but the Chancellor believes there is a “reasonable chance” that the government will be able to reduce inflation if they “stick to the course [they are] on”. In turn, Hunt is hoping that the Bank of England “might decide they can start to reduce interest rates”.[32]

Hunt is under further pressure from Conservative Party backbench MPs to cut taxes with a particular focus on Inheritance Tax (IHT). The Telegraph reports that IHT brings in approximately £8bn per year for the government so the Treasury could find itself with less fiscal headroom if the tax is abolished. After the Autumn Statement, the Office for Budget Responsibility (OBR) disclosed that the Chancellor was only left with £13bn to spare while hitting his debt reduction targets. This is less than half of the average fiscal headroom enjoyed by the Treasury since 2010.[33] Due to this, an unexpected downturn in economic forecasts could limit the scope of other tax cuts proposed by Conservative MPs.

The Prime Minister’s deputy spokesperson declined to comment on the matter but stressed the amount of money IHT raises. She said: “the tax is forecast to contribute almost £10bn a year by 2028-29 to help fund public services that millions of us rely on.”[34] There is division within the ranks of the Conservative Party about the idea. Former minister Jonathan Gullis stated that, even though he is in favour of abolishing IHT, he believes cuts to Income Tax should be prioritised. Similarly, former minister Neil O’Brien thinks that polls show that the majority of the population would prefer tax cuts aimed towards lower and middle earners.[35] Despite the Autumn Budget consisting of the largest single package of tax cuts since the 1980s, the overall tax burden for households is still set to rise to its highest level since World War Two.[36]

Further to the speculated tax cuts, The Independent reports that ministers are considering government support for longer fixed-term mortgages to lower the deposits needed for first-time home buyers. Another help-to-buy scheme could also be an option for either the 2024 Spring Budget or the Conservative Party election manifesto.[37] Meanwhile, shadow minister Matthew Pennycook promised that the Labour Party would “slash the discounts” on the Right to Buy scheme for long-term inhabitants of social housing. The party would also seek to reinstate building targets for local authorities and raise the surcharge on stamp duty for non-residents from 2% to 3%. They plan to award the estimated £25m this will raise to local authorities so that they can hire 300 new planners to reverse the decline caused by cuts to public spending.[38]

The Chancellor has commissioned the OBR to prepare an economic and fiscal forecast that will be published on 6 March 2024. These will be critical in showing how much leeway Hunt will have to meet his rule of bringing the UK’s debt down as a share of GDP while contending with backbench and Labour pressures before the election.[39]


[1] Benrath, B. (2023) UK, Switzerland sign Post-Brexit Financial Services deal, Bloomberg. Available at: (Accessed: 21 December 2023).

[2] Parker, G. and Smith, I. (2023) UK to sign post-Brexit financial services deal with Switzerland, Financial Times. Available at: (Accessed: 21 December 2023).

[3] Ibid.

[4] Forrest, A. (2023) Jeremy Hunt strikes post-brexit banking deal with Switzerland, The Independent. Available at: (Accessed: 21 December 2023).

[5] Parker, G. and Smith, I. (2023).

[6] Forrest, A. (2023).

[7] Inman, P. (2023) UK and Switzerland agree to deepen ties between city and Swiss Banking System, The Guardian. Available at: (Accessed: 21 December 2023).

[8] Parker, G. and Smith, I. (2023).

[9] Inman, P. (2023).

[10] Ibid.

[11] Parker, G. and Smith, I. (2023).

[12] Forrest, A. (2023).

[13] Fleming, S. and Steer, G. (2023) UK inflation falls to 3.9% in November, Financial Times. Available at: (Accessed: 21 December 2023).

[14] Elliott, L. (2023) UK interest rates expected to fall sharply next year as inflation drops to 3.9%, The Guardian. Available at: (Accessed: 21 December 2023).

[15] Fleming, S. and Steer, G. (2023).

[16] Elliott, L. (2023).

[17] Fleming, S. and Steer, G. (2023).

[18] Smith, E. (2023) Bank of England leaves policy unchanged, says rates to stay high for ‘extended period’, CNBC. Available at: (Accessed: 21 December 2023).

[19] Smith, E. (2023a) UK inflation slide fuels rate cut bets and jolts markets, CNBC. Available at: (Accessed: 21 December 2023).

[20] Ibid.

[21] Ibid.

[22] Fleming, S. and Steer, G. (2023).

[23] Elliott, L. (2023).

[24] Ibid.

[25] Smith, E. (2023a).

[26] Elliott, L. (2023).

[27] Smith, E. (2023a).

[28] Ibid.

[29] Ibid.

[30] Gregory, A. (2023) Chancellor Jeremy Hunt announces date for 2024 Spring Budget, The Independent. Available at: (Accessed: 02 January 2024).

[31] Parker, G. (2023) Jeremy Hunt announces March 6 Spring Budget, Financial Times. Available at: (Accessed: 02 January 2024).

[32] Ibid.

[33] Riley-Smith, B. (2023) No10 plans to end inheritance tax in spring ahead of election, The Telegraph. Available at: (Accessed: 02 January 2024).

[34] Walker, P., Partington, R. and Adu, A. (2023) Jeremy Hunt fuels election speculation as 6 March Spring budget announced, The Guardian. Available at: (Accessed: 02 January 2024).

[35] Ibid.

[36] Gregory, A. (2023).

[37] Ibid.

[38] Ibid.

[39] Parker, G. (2023).

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