November 2024 monthly update

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

House prices hit record high

According to Halifax, UK house prices reached a record £293,999 average in October. This figure surpasses the last peak of £293,507 in June 2022. Property values increased 0.2% month on month. This is a slower pace than previous months but is still a fourth consecutive monthly rise. From October last year, house prices increased 3.9% which was a slowdown from the 4.6% figure seen in September. Moreover, it was lower than the 4.1% rise predicted by economists polled by LSEG.[1]

Northern Ireland saw the highest growth with the average property costing £204,242 – a 10.2% increase from 2023. In England, the north-west had the strongest price growth – up 5.9% since last year. In the region, properties now cost £235,587 on average. As for London, the typical property costs £543,208 – an increase of 3.5% from 2023.[2]

Halifax expects prices to continue rising at a “modest pace” for the next few months. It did, however, issue a warning that mortgage costs could remain “higher for longer” following the Autumn Budget. After Chancellor Rachel Reeves outlined her plans, financial markets now predict that the Bank of England (BoE) will cut rates slower than anticipated.[3]

In early November, the BoE did issue a cut from 5% to 4.75%. Bank governor Andrew Bailey commented that interest rates would “continue to fall gradually from here”. Although, he noted that the BoE cannot cut interest rates “too quickly or by too much” to keep inflation close to its 2% target.[4]

In addition, the Budget increased stamp duty on buy-to-lets and second homes from 3% to 5%. Also, it removed the temporary increase on purchase price for nil rate of stamp duty – this is the sale figure before consumers must pay the tax. For first-time buyers, the nil rate will decrease from £450,000 to £300,000. Meanwhile, for those buying additional homes, it will drop from £250,000 to £125,000.[5]

Council pensions to be consolidated into eight ‘megafunds’

Chancellor Rachel Reeves revealed plans to build ‘megafunds’ with up to £80bn in fresh investments. With the recent collapse in allocations theorised to be a reason behind the UK’s lacklustre economic growth, she needs to address under-investment by pension funds in domestic assets. As such, she wishes to consolidate an estimated 60 Defined Contribution (DC) pension schemes and 86 Local Government Pension Schemes (LGPS).[6]

The reforms will be introduced in the Pension Schemes Bill next year. In England and Wales, the LGPS will manage assets of around £500bn by 2030. Meanwhile, DC schemes are expected to manage £800bn by the end of the decade. Consolidation into a handful of funds run by professional fund managers aims to allow them to invest more in ambitious projects on behalf of 6.7m public servants. The government claims that the move could deliver £80bn of investment into new businesses and critical infrastructure.[7]

Furthermore, the Financial Conduct Authority has authorised only five of the eight megafunds so far. The Treasury confirmed that they are waiting for the rest to be greenlit to ensure that they meet the highest standards and offer better value.[8]

While the plans bear resemblance to those in place in Australia and Canada, the Chancellor rejected more radical options. These include creating a single Canadian-style national fund, and forcing pension funds to invest in British assets. “We aren’t going to be mandating where the money is,” Reeves stated. “But investors in the US are getting returns from businesses headquartered here in London.”[9]

UK becomes Europe’s most active mergers and acquisitions hub

With the announcement of four takeover offers worth a combined £5.3bn this week, the UK has solidified its position as Europe’s most vibrant hub for mergers and acquisitions (M&A) in 2024. Dealmaking activity has accelerated after the Autumn Budget. Businesses now have more certainty to push forward with transactions before the year closes. Furthermore, the uptick may soothe fears of an economic slowdown under the new Labour government since their £40bn tax-raising Budget frustrated corporations.[10]

One of the highlights was a £701m bid by Macquarie for waste-management company Renewi. Also, Abu Dhabi-backed Fortress Investment Group purchased the pub and restaurant chain Loungers for £351m. Subsequently, the board of directors for TI Fluid Systems advised shareholders to vote for a £1bn offer from ABC Technologies; a Canadian company backed by Apollo Global Management. Although, Direct Line announced that it had rejected a £3.3bn offer from its rival Aviva.[11]

Iain Fenn, a partner at Linklaters, remains optimistic despite concerns over the tax rises on the private sector. “People generally see a more stable environment in the UK,” he commented. “Last year was terrible. There were lots of people looking at deals but we couldn’t execute anything. […] This year you’ve seen steadily rising confidence through the year.”[12]

Whether buying or selling, the value of M&A involving British companies hit $306.3bn. According to Dealogic, this is a 57% increase on the same period in 2023. Consequently, activity among UK companies has now outdone that of the rest of the continent since the beginning of 2024. In comparison, the total value of mergers and acquisitions was $143.2bn in Germany; $142.3bn in France; and $91bn in Italy.[13]