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42 | THE INVESTOR
THE INVESTOR CENTRE
All information correct as at 31 March 2016
September sees the start of a roll-out by the
Bank of England of new longer-lasting banknotes
– made not from paper, but from plastic
Notes of interest
T he fiver in your
pocket will last a
bit longer from
September – not
because its spending
power will increase, but because the
note will be made from a thin plastic
film (also referred to as polymer).
It will be the first time that such a
banknote has been issued in England
and will be followed a year later by a
plastic £10, while the £20 will follow
suit within the next five years. No
decision has been
taken on the future
of the £50 note.
The Bank of
England says
the new notes
will last around
two and a half
times longer
and will survive
a cycle in the
washing machine,
although they will wilt if you try to
iron them.They will also stay cleaner
and can incorporate extra security
features.They will be printed by
De La Rue, which already produces
the paper notes, and will be slightly
smaller than the existing notes, so
ATMs and other cash dispensers may
need to be upgraded.
A public consultation on the
change showed 87% of the 13,000
people who responded were in favour
of the change.The new notes will
carry new portraits: SirWinston
Churchill will replace Elizabeth Fry
on the £5 note while JaneAusten
will replace Charles Darwin on
the £10 note.The portrait that will
feature on the £20 will be announced
in the spring from a list of 590
public nominations of visual artists,
including the likes of Capability
Brown, JMWTurner,Augustus
John andWilliamHogarth.
The September
printing will not
be the first plastic
notes in the UK;
Clydesdale Bank
issued plastic
£5 notes in
Scotland last year,
while the Bank
of Scotland also
issued limited
edition £5 and
£10 plastic notes to commemorate
Children in Need in 2015, and will
start issuing them generally on a
similar timetable to the Bank of
England.Australia was the first country
to issue purely plastic notes and other
countries, including New Zealand,
Mexico and Fiji, now do the same.
Although they are more expensive to
produce, their greater longevity means
they are cheaper in the long run.
They’re expensive to
produce, but their
longevity means
they’re cheaper in
the long run
From an investment perspective,
the world looked a risky place as
we entered 2016 and these risks have
weighed heavily on markets in Q1.
Among these risks are concerns about
the Chinese economy, the ensuing
continued declines in the price of key
commodities and worries about global
liquidity after the Fed’s first rate
increase in nearly a decade.
Moreover, the recent market
volatility represents a growing fear
that policymakers globally are failing
to understand today’s economic
problems and are therefore prescribing
the wrong policies. Despite the
Fed’s recent hike, investors appear
increasingly concerned that rates can’t
go low enough to maintain growth.
Last year was a year of capital risk,
with a significant difference between
the best- and worst-performing stocks
on the UKmarket.This year already
appears to be one of dividend risk,
with dividend cuts already announced
from several high-profile miners,
banks and expect this
theme to continue. Reassuringly, our
portfolios are not exposed to the parts
of the market most at risk of dividend
such,we remain confident of
delivering dividend growth.
WOODFORD
Income Distribution, UK Equity and
UK High Income
Stock selection is key to sustainable
dividend growth
This appears to be
the year of dividend
risk for investors
Neil Woodford
By Heather Connon