Wage growth averaged just 2.2% per household for much of 2017 and there is little sign of change coming. This means that household budgets are expected to stay strained throughout 2018.

According to the Lloyds Bank Spending Power Report, consumers are much more concerned about the state of the economy and their wages than they were at the beginning of 2017. This general feeling is likely in part coming from the uncertainty surrounding the UK’s future after leaving the EU.


“We ended 2017 on a positive note, with the Department for Work and Pensions publishing its review of automatic enrolment. The decision to reduce the age of auto enrolment to 18 was a welcome one, along with the change to the definition of “band earnings” which will no longer exclude the first £5,876 of salary”, notes Peter Glancy, head of policy, pensions and investments for Scottish Widows.

For 2018, Glancy expects the political interest in pensions to ‘step up’ as people become increasingly concerned about their retirement funds.


The Bank of England (BoE) reported rising levels of household financial distress in 2017 and it is thought this is unlikely to change in 2018. Throughout 2017, personal debt hit levels not seen since before the financial crisis, and a recent study conducted by the BoE suggests that people think that this is only going to get worse during 2018.

Matt Whittaker, chief economist at the Resolution Foundation, warns that “it is worrying that the rise in distress has come against a backdrop of ultra-low interest rates that are expected to rise over the coming years.”


Markets remained fairly stable throughout 2017. However, investors should be prepared for this to change in 2018, according to Kames Capital’s chief investment officer Stephen Jones. “Forecasts for growth and profits are now much more realistic,” he says. “It is probably naïve to anticipate that markets will go up in a similar ‘straight line’ as they have this year.”

“Investors should not lose faith in equities next year,” he says. “Despite the rise in market levels this year, little has changed. The economic outlook for Europe and Japan looks solid, China seems set for solid 6% growth or more and the US is ending the year strongly.”

Jones thinks that 2018 looks capable of being as rewarding for investors as this year, although it will probably be more ‘exciting’.


Annual house price growth nationally is set to stay low at between 0 and 3 per cent for the year as uncertainty over the UK’s economic outlook continues.

“UK house prices in general are likely to see modest growth in 2018, through the combination of a shortage of properties for sale, continued low levels of house building, low unemployment levels and finally good levels of affordability due to the low interest rate environment,” says Halifax Bank’s Managing Director, Russell Galley.


Last year, we saw Sterling dramatically rise and fall as the Brexit negotiations and snap election took their toll. However, Sterling is now expected to rise against the Euro thanks to the progress made in the Brexit talks at the end of 2017 and rising U.K. real yields relative to Eurozone yields.

“Sterling is set to outperform the Euro in 2018. We expect the 10-year UK real yields to improve mainly because of a drop in inflation due to the fact that currency weakness in 2016 will fall out,” says Georgette Boele, a senior FX strategist at ABN Amro.

Of course, Brexit will continue to play a strong role in Sterling-Euro direction in 2018 and progress in negotiations is key to the value of Sterling.

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