In the News Teaching Activity –the UK macroeconomy 2023 highlights (Jan 2024)

Ed Conway, the Sky News economics correspondent considers whether 2023 was a good or bad year for the UK economy.

In 2023, the UK's economy was a bit more stable after the tumultuous events of 2022, which included high inflation and the financial meltdown after the Truss government’s budget. Despite initial expectations of a recession for 2023, the economy did, in fact, flatline, though a ‘technical recession’ could still have occurred if the 2023 Q4 GDP growth is negative. The Prime Minister's inflation-halving pledge saw success, though it is difficult to credit the government for this, given monetary policy is in the hands of the Bank of England. However, this disinflation didn't fully address the cost-of-living crisis, as prices are still increasing considerably faster than the 2% target. Interest rates rose higher than anticipated to 5.25% but are now expected to decrease in the coming year. Taxation was also a prominent issue, with the government aiming for cuts, yet the overall tax burden is set to reach its highest since the 1940s. Legal migration, driven by post-Brexit rules, reached an unprecedented level of 745,000, mainly from outside Europe.

The key economic graphs that define 2023 | Business News | Sky News

1 What is a ‘technical recession’?

2 How does an increase in interest rates help bring inflation back down towards its 2% target?

3 Discuss the likely impact on economic growth of (a) a higher tax burden, and (b) a rise in legal migration.