Britain is heading for a world of financial pain – what I’m doing to protect myself: JEFF PRESTRIDGE

No one knows what the future holds for us, especially when we have a violent situation that is holding the whole world to ransom.

However it is blindingly clear that the UK will have a very difficult journey in the coming months, regardless of whether a ceasefire is agreed between the United States and the pariah regime of Iran (pariahs who kill their children do not change their turf).

For most families, cutting the gaps will be a daily affair – and a year-round order and possibly more.

The tragic events of the last few weeks in the Middle East have had an inevitable negative impact on the future of the UK economy.

We were already facing a ‘horror’ in April – ‘Billmaggedon’, according to my colleague Helen Kirrane on pages 52-53 – due to high council tax bills, rising internet and mobile phone charges, and continued tax cuts.

But now, 2026 is even worse. Inflation, interest and mortgage payments, energy and food costs, and gasoline prices will all be pushed higher this year.

UK Government bond prices will also come under extreme pressure for all sorts of reasons (as David Coombs of investment house Rathbone Asset Management correctly predicted when I spoke to him earlier this month). It’s not good news for Chancellor of the Exchequer Rachel Reeves.

Unemployment, unfortunately, will continue to rise, and the UK economy is likely to collapse.

As for the financial markets – where most of our long-term wealth is tied up – price gyrations may be the norm until Iran stops (voluntarily or forcibly) its hold on international trade that passes through the Strait of Hormuz.

A beautiful blur? Unfortunately, the answer is yes. That’s what all the financial experts tell us. Even this pessimistic, inflexible Government, which has trapped the country in the pit of rising wages and high taxes (personal and business), now believes that the economy is facing ‘big challenges’.

So far, it has done little to respond to the consequences of the conflict in the Middle East (financially and militarily) without putting together an aid package for those who heat their homes with oil – and to worry about the hard landing for companies that use the geopolitical imbroglio to price (profit at the expense of consumers).

More Government aid may be announced in the coming weeks (or months), but it will not be on the scale we have seen in response to the UK recession in 2020 or the rise in energy prices following Russia’s invasion of Ukraine in 2022.

Chancellor Rachel Reeves has made it clear that any reform measures will be targeted at lower-income households than applied across the board (the exception being a possible extension to the 5p discount on fuel which is currently due to expire in September).

It makes sense on one level, but it’s deeply political and predictable on another given Labour’s dislike of the middle class (we’re only there to get tax breaks) and its obsession with green energy (backed by our star energy budgets).

Are there any financial chinks of light that we can be aware of? And are there things we can do to help our finances?

The answer to these questions – fortunately – is yes.

The shafts of light are very rare, but they are coming in the form of a high pension that will start next month. It represents an increase in inflation, but will be offset by rising food and energy bills.

The new energy cap, which starts on Wednesday, will also temporarily reduce gas and electricity bills, reducing annual bills by 6.7 per cent to £1,641. But this is the calm before the storm. Energy experts are now predicting that the cap may exceed £2,000 when it is set in the last three months of the year.

So much for Labour’s promise to reduce annual debt by £300 by 2030.

It also appears that car and home insurance rates are falling, although this may last until the end of the year.

So what is to be done?

There are options, as many financial experts have been eager to explain to me.

All may not work for you depending on your age or financial situation. But I’d be surprised if at least one idea doesn’t save you money.

Power: In electricity bills, it is important to check the options without the prices, although it is difficult to find prices that are cheaper than the last seven days. They will give you financial peace of mind if energy prices reach the levels predicted by experts.

See: thisismoney.co.uk/energy-deals.

In fact, I just signed a two-year contract with EDF Energy. Other options to consider include discounted rates (below the purchase price) and time-of-use rates.

Susannah Streeter, chief investment strategist at Wealth Club, says: ‘Time-of-use charging charges different rates based on when you use energy, with smart meter tracking.

‘For example, if you can run your dishwasher, dishwasher or batch cooker late at night, it can fit into your lifestyle while helping your budget.’

Amount: It makes more sense than ever to have a “buffer” of cash to meet unexpected – and rising – debts. It’s also a good time to read your bank statements and identify annual or monthly payments that are more than necessary.

Streeter says: ‘Ruthlessness is normal.

Ask yourself, “Do I really need more streaming services, repeat purchases of protein shakes or beauty products?” If the answer is no, cancel.

‘Equally, if you spend £50 a month on health treatments or gym memberships, use the money instead to offset any rises in food and energy bills.’

Managing your inventory effectively is more important than ever. That means using tax-efficient cash Isas and making sure you get a good interest rate.

“Savers need to monitor the return they get on their money,” says Ian Futcher, financial planner at wealth manager Quilter.

‘Now they have to be prepared to move the supplier to get a competitive edge.’

Home loans: About two million homeowners will be looking to foreclose on their homes this year.

With rates – fixed rates in particular – rising, using a mortgage broker to secure you the best price is a critical issue: one that can disrupt the entire mortgage market.

Buying before your current business ends makes good financial sense.

David Hollingworth of L&C Mortgages says: ‘Mortgage rates usually run for up to six months. So you can lock in the rate, but change if the deals improve before the deadline.’

He adds: ‘The only thing you need to be aware of is that if you get a fixed fee for six months in advance, it may mean that you will not enjoy the whole period. This is because most fixed income contracts have a predetermined end date.’

Other options to reduce ongoing loan costs include extending the loan term, thereby reducing monthly payments. This provides some breathing room but the downside is that it will result in higher interest costs overall.

And finally…

In the context of investing, it’s tempting to run for the proverbial hills when the investment markets don’t change. But I agree with Emma Wall, chief investment officer at Hargreaves Lansdown, when she says: ‘The most sensible thing for most traders to do is nothing.’

He adds: ‘Investors need to remember that these are the whipsaw stock markets we have – and it’s almost impossible to trade with confidence’.

I’ll give the final word on investing to Paul Kearney, chairman of investment specialist Asset Risk Consultants. He says investors should keep their portfolios diversified and stable.

He adds: ‘Mass market production is not designed to produce dramatic stories. It is designed to capture the grades provided by the markets with less reliance on individual judgement.

‘It increases the likelihood of staying on course, which remains one of the strongest predictors of long-term outcomes.’

In other words, keep investing in your stocks and shares Isas and investing in your pension.

And don’t let short-term noise get in the way of your long-term financial goals.