For me, when it comes to investments, 2024 will always be the year when the Conservatives introduced the UK Isa, only for Labour to scrap the idea after winning the election.
However, it would be wrong to claim this moment defines 2024 entirely. Probably the pivotal moment shaping this year’s landscape was chancellor Rachel Reeves’ debut Budget on 30 October.
Of course, speculation about what it might include before it was officially announced was rife. As Walker Crips business development manager Alan Kinnaird said, “we have never talked so much” about a Budget ahead of it taking place.
Hargreaves Lansdown head of fund research Victoria Hasler added that Reeves’ first Budget – on the eve of Halloween – had spooked investors.
She was responding to research from her firm that revealed confidence in UK’s economic growth has dropped by almost a fifth (19.8%)
Primarily driven by concerns over potential changes to capital gains tax (CGT) and pension reforms, Hasler described the situation as a “pretty scary time for UK investors”.
We have never talked so much about a Budget ahead of it taking place
These fears were realised when Reeves raised CGT rates, increasing the lower rate from 10% to 18% and the higher rate from 20% to 24% with immediate effect.
As a result, 69% of UK independent financial advisers believe clients will hold onto their investments for longer to defer paying the higher CGT rates, according to research by savings platform Flagstone.
Additionally, Continuum research indicated that the Budget led to a higher number of younger adults aged 18-24 planning to access financial advice for the first time.
‘Double-count costs’ for investment trusts
The Budget definitely left a sour taste for UK investors and businesses. However, one government announcement just before the Budget was praised.
The investment sector welcomed the news that that cost-disclosure requirements for investment trusts would be temporarily banned.
The announcement, by the Treasury and the Financial Conduct Authority in September, came following years of investment companies calling for change.
These rules were inherited by the European Union (EU) and made it appear that investment trusts were more costly to put money into than they actually were.
This is because the disclosure rule requires trusts to publish the costs of financing, operating and maintaining real assets.
However, many of these costs are already published in regular company updates and reflected in the value of the share price for all investment companies.
The rules made it appear that investment trusts were more costly to put money into than they actually were
This created a “double counting of costs”, which investment trusts have long claimed puts investors off, preventing an estimated £7bn a year more being invested.
The Treasury pledged to lay out legislation to provide the FCA with the appropriate powers to deliver reform – the new Consumer Composite Investments (CCI) regime.
It said the new CCI regime will provide more tailored and flexible rules to “address concerns across industry with current disclosure requirements, including for costs”.
The UK’s new retail disclosure regime is expected to be in place in the first half of 2025, subject to Parliamentary approval and following a consultation from the FCA.
The Association of Investment Companies (AIC) chief executive Richard Stone described this as “great news”.
Across the pond
Another sizeable event that took place in November 2024, was Donald Trump’s White House victory in the US.
Trump won the popular vote as well as both chambers of Congress, giving the returning president substantial power to enact his agenda.
Newton Investment Management deputy head of equity income portfolio manager John Bailer believes the regulatory environment in the US will do better under a Trump administration.
Investors have pumped almost $140bn into US equity funds since Trump’s victory, according to data provider EPFR, as there is a belief that his administration will implement tax cuts and reforms in a boost to corporate America.
However, there are also fears that Trump will impose tariffs on certain countries, which could drive up inflation.
Sustainability Disclosure Requirements
Finally, the publication of the Sustainability Disclosure Requirements (SDR) consultation policy statement, released by the FCA towards the end of 2023, resulted in numerous investment businesses adopting the SDR labels throughout 2024.
The idea is to clamp down on greenwashing in the investment world.
The FCA’s proposals are initially aimed at asset managers and their UK-based funds and portfolio management services. But over time, the regulator wishes to “expand and evolve” the regime to other sectors.
Four labels were created: sustainable focus; sustainable improvers; sustainable impact; and sustainability mixed goal.
Schroders, Fidelity, Ninety One, TIME Investments and M&G, to name just a few, have adopted a label.
However, not everyone has followed suit, even those who describe themselves as sustainable investment specialists. Castlefield, for example, is taking a “wait and see” approach.
The label regime requires a lot of data that is not always available
One issue surrounding the label regime is that it requires a lot of data that is not always available, especially when it comes to funds that focus on smaller companies.
Still, Castlefield said it will be reviewing the SDR matter on an ongoing basis, and we shall see how much market penetration these labels receive in 2025.
We will also see if the new retail disclosure regime, which is expected to be in place in the first half of 2025, comes to pass.
Also the world will hold its breath to see what policies US president elect Trump implements.
Lastly, we shall see if market sentiment begins to improve following Reeves’ Budget, with numerous businesses announcing job cuts as a result of it.
Ongoing developments in these areas will heavily influence on how investments pan out in the UK over the next 12 months.
Darius McQuaid is a reporter at Money Marketing
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