UK 2024 Economic Outlook

The UK has had a difficult economic situation since the beginning of the COVID-19 pandemic. Although there has been an increase in GDP, there has been a rise in inflation resulting in a stagnant Real GDP with the ongoing possibility of a recession. However, Goldman Sachs reports that “…[T]he economy has shown surprising growth resilience and (so far) avoided a recession. We expect growth to improve modestly in 2024 as real disposable income rises and the growth drag from the BoE’s tightening diminishes. We look for growth of 0.6% next year, slightly above consensus.”

To aid in the battle against inflation the Bank of England has raised the Bank Rate for the time being to reduce the possibility of a large inflation jump that often occurs after periods of economic unrest. But the expectation is for: “…the MPC to lower Bank Rate in 2024Q3 (in line with the ECB but one quarter before the Fed), followed by quarterly 25bp steps until reaching a terminal rate of 3%.” (Goldman Sachs)

This slow let down of the Bank Rate, combined with a difficult labor market, indicates that 2024 will likely be a year of slow growth but there is hope on the horizon as the Treasury has recently announced an update to the social security tax code that has resulted in higher forecasts than were previously created. ”J.P. Morgan raised its growth forecast to 0.4% from 0.2% expected earlier, while Goldman Sachs changed its forecast to 0.7% from 0.6% earlier.” (Reuters) And that “Taken together, our analysis of the main growth drivers points to a modest pickup in growth next year.” (Goldman Sachs)

GDP (Millions of Pounds)

CPI (Index 2015=100)

Sources: Organization for Economic Co-operation and Development, Consumer Price Index: All Items: Total for United Kingdom [GBRCPIALLQINMEI], retrieved from FRED, Federal Reserve Bank of St. Louis, December 5, 2023.

Central Bank

Sources: Bank Rate, Total Assets retrieved from the Balance Sheets of the Annual Report of the Bank of England

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