The Bank of England revised its forecast for UK inflation in the first week of August to an expected rise of 4% by the end of the year. This based on Britain’s economic growth rate surging as Covid restrictions release with predictions of 8% rise by the end of the year. The BoE have stated that they see the current rise in inflation as temporary and will refrain from any immediate action, however modest interest rate rises may be enacted next year if necessary.
UK inflation rate rose 2.5% in the month of June 2021, exceeding the Bank of England’s 2% target and the general economic forecasts. Savers are being encouraged to take action to protect value and tangible, alternative investments such as fine wine are an option.
It is thought that the Bank of England will refrain from deploying the usual tactics to manage inflation in the short term. There is still a high degree of uncertainty in global economies, Covid is a long way from being under control. As the end of the UK furlough scheme approaches, consumer confidence is still fragile and the Bank of England is likely to delay making a decision on interest rates for now.
What does this mean for wine investors? Fine wine will continue to offer stable growth in a period of rising inflation, in fact now at its highest level since August 2018. Savers are being encouraged by financial advisors and wealth managers to act now to do what they can to make their money work harder, rather than watch cash savings’ value eroded by inflation. Alternative, tangible investments such as fine wine offer a solution to protect capital, whilst maintaining some degree of flexibility. In a rising, comparatively liquid market, investors can benefit from inflationary uplift in values and not be locked in to an investment; able to exit when circumstances best suit. We should caveat that by reminding investors that fine wine is generally a medium to long term hold to optimise returns.
Fine wine is also a tax efficient investment, as any profits from sale are generally exempt from Capital Gains Tax, subject to personal circumstances. For more information see our latest Report on the Tax Treatment of Fine Wine in the financial year 2021 / 22. Investors should seek advice from their financial advisors and for more information on the current fine wine market opportunities, call our expert team on 0203 384 2262.