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10 April 2024

The UK Economy Today

Having a clear understanding of the economic picture across the UK is fundamental in driving your business toward continued growth. We’ve compiled some of the key data and analysis to give you complete clarity on the present and future of the economy.

Let’s delve into the key indicators and forecasts shaping the UK economy in 2024.

Inflation and Household Finances

The latest data and analysis show largely positive indicators for the future of personal spending. EY consumer insights report that extreme concerns around finances are falling as consumers begin to invest in treats, experiences and non-essential items.

A similar marker is found in a shift back to brands from private label products, as price differentials shrink. According to Kantar, the UK has experienced a notable downturn in grocery inflation, marking its lowest level since February 2022. This all culminates in an overall, vastly improved mood from consumers. Despite many positives, according to Kantar, 23% of UK households continue to face financial struggles, highlighting persistent economic disparities.

Our latest insights show the majority of our listeners are finding life difficult on their present income. 76% say they spend money more carefully than they used to and a striking 258,000 listeners expect to experience redundancy from work in the next 12 months. It’s clear that whilst the medium-term outlook is positive, the general public has yet to see or feel the uplift and continues to struggle.

Policy Stagnation and Cautious Optimism

It’s been a tough few years for people of all backgrounds. When we look at historical data, we find the Bank of England has maintained its policy rate since the onset of the pandemic in March 2020. This is over four years without a decline in interest rates. Despite marginal contractions in the UK’s gross domestic product (GDP) in the third and fourth quarters of 2023, the overall economic impact has not triggered significant reactions in currency markets or altered expectations for monetary policy.

Recent deliberations within the Bank of England’s Monetary Policy Committee have revealed divergent opinions regarding future rate adjustments. While a majority opted to leave the key rate unchanged at 5.25%, discussions have opened the possibility of rate cuts in 2024 if inflationary pressures ease. Future market traders have added weight to this prediction with Reuters reporting a 55% chance of rate cuts in June.

Consumer Sentiment and Labour Dynamics

Insights from EY’s Future Consumer Index (FCI) suggest a shift in consumer behaviour, with increasing confidence and a willingness to invest in discretionary items. This trend coincides with a gradual easing of the squeeze on living standards, offering glimmers of hope for a broader economic recovery.

However, underlying challenges persist, as evidenced by a record number of working-age individuals classified as long-term sick or disabled. Addressing these structural issues remains critical to fostering inclusive economic growth and resilience.

Finally

In conclusion, while the UK economy navigates uncertainties and structural transformations, early indicators of recovery and evolving consumer sentiments hint at a gradual rebound. Yet, the path forward requires a delicate balance of policy interventions, investment strategies, and social support mechanisms to ensure sustainable economic progress.

It appears that the rest of the year will offer more opportunities for growth than previously expected. Despite this, to expect an avalanche of business would be naïve. It seems more likely we’ll see a slight loosening of purse strings as major shifts such as a decline in the baseline interest rate and dropping inflation leave consumers feeling at least a little, unexpectedly comfortable.

Focusing on casting your net and optimising the top of your sales funnel should be central to your strategy. Investing in strategic marketing projects now will pay dividends in months to come. What remains true is neglecting the essential groundwork needed to engage fresh customers now will leave businesses playing catch up when purse strings loosen. This will leave those unfortunate businesses watching their competitors clean up in a few months time, whilst they’re busy scrambling to simply start conversations.

It’s down to you to decide now which path you take. Are you focused on gaining maximum returns from the economy’s return to health? Or are you ok to roll the dice and leave it to chance?

Sources:

  • UK retail spending grows despite cost-of-living crisis | EY UK
  • A view from London economics blog | Deloitte Insights
  • UK economy returns to modest growth at start of 2024 | Reuters
  • UK Economic Outlook – March 2024 (kpmg.com)
  • Home – Office for National Statistics (ons.gov.uk)
  • What can we expect from the UK economy in 2024 after recession? | Reuters
  • Global inflation and interest rates tracker: see how your country compares (ft.com)

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