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15 January 2024

In the wrong gear – The state of the UK economy in 2024

Another year over, and for many people, this couldn’t come soon enough. 2023 proved to be a year of surprises, with the UK economy remaining buoyant despite experts fearing the worst. The great post-COVID slump never came, but this doesn’t necessarily imply it’s all up from here. Through this article, we’ll be illustrating a broad range of data and opinions, to give you a clearer path to success this year.

The Predictions

Contrasting forecasts from prominent institutions paint a complex picture of the nation’s economic trajectory this year. Goldman Sachs is optimistic, predicting a 0.6% expansion, surpassing the Bank of England’s forecast of 0.1% and slightly edging above the consensus of 0.4%. However, RSM takes a more cautious stance, anticipating a modest growth of 0.5%, signaling another year of stagnation. Latest reports show inflation currently sitting at 4.6%, and despite divergence on other issues, both Goldman Sachs and RSM project a similar decline in inflation, to 2.8% and 2.5% respectively by the second half of the year.

Although recent Office for National Statistics (ONS) revisions indicate a faster-than-expected recovery from the pandemic, the momentum has waned. Despite a promising start to 2023, lackluster performance in the second half of the year culminated in an overall growth rate of 0.6%. The British Chambers of Commerce (BCC) presents a restrained outlook for 2024, forecasting a meager 0.4% growth and a slightly improved 0.6% in 2025.

As echoed in our winter retail report, stagnation looks to be the theme this year. Modest GDP, slowly declining inflation, and a general lack of buzz around the UK both from investment and internal enterprise, puts businesses in a less-than-optimal position.

The Root

A handful of primary factors are identified as impediments to economic growth. The number of people employed in the UK remains below pre-pandemic levels, this is despite a population increase of nearly 300,000. Rising unemployment looms, with the unemployment rate projected to reach 4.8% by the end of 2025, as demand remains subdued and the number of vacancies declines. The sluggish state of business investment and productivity growth, highlighted by a meager 0.3% year-on-year productivity increase in Q2, compared to 2.2% in the US, poses a significant challenge. With muted labor supply and challenging demographics, increasing productivity becomes paramount to breaking the economy out of its growth stagnation.

Further issues arise from the UK mortgage market’s susceptibility to inflation, something we’ve seen in droves this past year. A large part of the impact of higher interest rates is still to come, pressure on consumption and the housing market looks to depress growth only further.

The effect on public thinking

Consumer sentiment adds another layer to the economic narrative. As you would expect, the condition of the economy is a focal point for consumers heading into 2024, and the trajectory is quite commonly perceived to be declining. 41% of consumers say they’re feeling less financially secure heading into 2024, than at the start of 2023. This sentiment is reflected in purchasing patterns, as nearly half of consumers plan to opt for own-brand or value goods, along with promotional or discount items. A significant 58% of consumers intend to cut non-essential spending in 2024, with only 8% planning to increase expenditure compared to 2023. Perhaps even more striking, when looking at any concerns consumers have going into 2024, food prices, energy bills and fuel prices are by far the top 3.

Making money in purgatory

As the UK treads cautiously into 2024, the delicate balancing act between economic growth, employment, and consumer confidence remains a key challenge for policymakers and businesses alike.

Two distinct focuses are crucial for businesses going into this new year. The first is a focus on empathy for the position of your consumers. As illustrated in this report, their mindset is marked by financial insecurity and close monitoring of pricing. Understanding how they intend to approach spending and how this differs from last year, gives you clarity on how your revenue will develop within your current way of operating. Forward-thinking, i.e. amassing data from years gone by is flawed logic when the ground is shifting beneath you. Understanding your customer’s perspective and motivations is a better base for success in times of economic difficulty. Second is a focus on repositioning with the customer’s mindset in mind. For many, last year’s wages are stretched thin by this year’s prices, and that’s without factoring in their bills. Purchasing power is diminished, and where your business may have been essential in previous years, it could now be surplus to requirements. A change in how you market your business and exactly what product you’re pushing is critical.

Will the UK economy keep up with the rest of Europe in 2024? (
Economic outlook 2024: on a knife edge (
Bauer UK listener club September 2023 survey
Traders lift bets on UK interest rate cuts in 2024 after economy shrinks in October – as it happened | Business | The Guardian
BCC Economic Forecast: Economic Growth Stuck In A Rut – British Chambers of Commerce
Renewed signs of stress hit UK economy – KPMG UK
41% of people feeling less financially secure heading – KPMG UK