After enduring a prolonged period of slow growth, the UK economy is showing signs of recovery, moving past the potential recession that loomed over the latter half of 2023.
The Centre for Economics and Business Research (Cebr) suggests that the worst may be over, with expectations for gradual improvement in 2024.
The UK’s economic challenges have been exacerbated by the pandemic and the cost-of-living crisis, with recent data indicating a 0.1% contraction in Q3 GDP – the first since Q3 2022.
Despite a temporary inflation spike in December, overall trends and the festive season’s weak retail performance hint at a cautious consumer mindset.
Looking ahead, Cebr anticipates a technical recession might have marked the end of 2023, setting the stage for recovery driven by increased real disposable incomes and consumer spending.
The upcoming Spring Budget presents an opportunity for expansionary fiscal measures to bolster this recovery, although the overall growth trajectory for 2024 is expected to remain subdued due to ongoing macroeconomic challenges, including high-interest rates.
Interest rates, currently at a 15-year peak, have played a crucial role in managing inflation, with expectations of a rate cut by May 2024, potentially reducing the base rate to 3.75% by year-end.
However, risks such as labour market dynamics and international supply chain disruptions could influence inflation and interest rate strategies.
Cebr forecasts a modest improvement in economic growth for 2024, albeit below the long-term trend, underscoring a continuation of the UK’s struggle with weak growth.
The comparison with pre-pandemic growth projections indicates a significant economic shortfall, highlighting the need for substantial policy interventions to address core issues like productivity and labour market inactivity.
