Despite the turbulent times that have befallen the UK economy over recent months and years, experts are reporting a positive outlook.
The impacts of Coronavirus, Brexit and wider supply disruptions may still be taking their toll but there is scope for optimism.
In this article, we’ll take a look at what experts are saying about the likely trends and how it will impact businesses, families, and property owners.
According to Handelsbanken, a leading international bank, the UK’s near-term outlook remains a little uncertain as we continue to navigate our way through the aftermath of the pandemic and the ongoing consequences of the war in Ukraine.
However, there are many positive signs that suggest the worst is behind us and a return to some stability is expected.
James Sproule, Chief Economist at Handelsbanken recently delivered a webinar at which he shared some detailed insights and data about the economy, including some thoughts about ‘what’s next’, including (some very brief headlines):
- The UK is unlikely to avoid a recession, but the expectation is that it will be ‘mild’.
- The employment market is broadly good.
- It is likely that we have seen the peak of inflation, towards the end of 2022, but we can expect inflation to come down slowly. Falling energy prices will help drive inflation lower.
- The bank base rate has increased to 4% and may go up a small amount more to possibly 4.25% or 4.5%, but should then stabilise. It’s unlikely to drop in 2023.
- We are unlikely to return to the ‘cheap money’ we experienced between 2015 – 2020.
As for the impact of the pandemic on certain sectors, the following trends are being observed:
- Flights at Heathrow – down 14% & passenger numbers down 18% from pre-pandemic levels.
- Hotel bookings in the UK – down 5%.
- Offices/property – no reliable data but indicatively 8% more people work from home on Friday’s.
- Online shopping (amongst other things) has created new behaviours and habits that will be hard to reverse.
- Property – all asset classes are expected to reduce in value.
What does this mean for businesses and families?
Businesses have something to be optimistic about; consumer spending increases, new investments in technology and a reduction of overhead costs associated with office space rental should all contribute towards improved bottom lines.
Wages are also likely to rise although possible not in line with inflation. As wages increase this allows families the chance to gain financial stability by saving more money for larger purchases such as homes or cars. Furthermore, inflation rates should stabilise – providing some welcome relief through more static prices on everyday goods.
What does this mean for property owners?
In the short term, with interest rate rises, people selling their properties may find the market weakening as affordability may become an issue. As people adjust to normalised interest rates rather than the ‘cheap money’ that has been available we can expect, over the longer term, property owners experiencing a welcome period of stability, with the likelihood that consumer spending will return and strengthen demand for housing.
Trusted advice, and insight for your business
All in all, while there are still many uncertainties surrounding how exactly the UK economy will look beyond 2023 after a number of uncertain years, it looks like there is light at the end of this long economic tunnel.
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