Interim Management Statement Q1 2024

9 February 2024

HARGREAVE HALE AIM VCT PLC
(the “Company”)

Interim Management Statement

Q1 2024

Introduction

This interim management statement covers the first quarter of the 2023/24 financial year, 1 October 2023 to 31 December 2023. Investment performance measures contained in this report are calculated on a pence per share basis and include realised and unrealised gains and losses.

Overview

The inflation outlook continued to moderate in the UK, US and elsewhere in the quarter, with headline inflation falling more quickly than many had expected. Dovish comments from the Federal Reserve raised the prospect of potential cuts in the base rate as early as March 2024. Improving sentiment and substantially easier financial conditions helped to push markets higher in the run up to Christmas.

Whilst still high, UK wage growth has started to moderate, falling from a high of 8.5% in July to 6.5% in November 2023. Along with steep falls in the cost of energy, this has taken UK inflation (Consumer Price Index, CPI) sharply lower to 4.0% in December 2023.

UK consumer confidence continues to recover as the cost of living crisis abates and the outlook for the mortgage market improves. ONS data painted a mixed picture over Christmas with robust consumer spending focused on food and leisure and weaker spending on non-food items such as durable goods and clothing. The combination of stronger trading over the Black Friday weekend and weakness over the Christmas period suggests consumers were focused on value. UK unemployment remains well contained.

The UK economy continues to outperform very modest expectations, albeit still flirting with recession. Purchasing Managers’ Index (PMI) reports, which offer a view on the prevailing economic trends, indicate some strengthening of the economy in November and December with the UK composite PMI, which draws together the individual sectors, signaling an expansion in business activity with strength in the dominant services sector more than offsetting weakness in manufacturing and construction. Post period end, the Bank of England made minor positive revisions to its growth outlook for 2024 whilst paring back its inflation forecast, potentially paving the way for rate cuts in summer 2024. The futures market neatly illustrates this change in expectations. At the start of this financial year, the markets were forecasting rates to remain unchanged at 5.25% through to September 2024. In contrast, as at 31 January 2024, the markets were forecasting that the Bank of England would cut three times to 4.5% by September 2024. If this plays out, and it should be noted that these forecasts can be quite volatile, then it will significantly help UK households, the broader economy and, we hope, the appetite for risk assets.