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Key Update on the UK Economy - December 2023

Geoff Riley

27th November 2023

Join Geoff for a 20 minute overview of the latest changes in the UK economy. Superb application for students ahead of macro mocks! You can also download the chart deck used in the presentation by clicking on the link below.

Key Update on the UK Economy - December 2023
  1. UK Economic Challenges: The UK economy has faced external shocks, including the pandemic and an energy crisis. Stagflation risk emerged, but inflation, peaking at 11%, is now falling (4.6%). Despite this, real incomes are declining, taxes are rising, and the impact of recent central bank interest rate hikes will continue into 2024.
  2. Interest Rate Adjustment: Interest rates in the UK rose from 0.1% in 2021 to 5.25%. While inflation is decreasing, interest rates may remain higher than pre-Global Financial Crisis levels. The economy is adjusting to this new norm, affecting various sectors like mortgages and retail credit.
  3. Housing Market Impact: House prices are declining, possibly by 3-5%, raising concerns about the scale and duration of the deflation. The economic data suggests the avoidance of a recession in 2023, but overall growth is sluggish, with UK real GDP only 2% larger than four years ago.
  4. Employment Landscape: Unemployment is currently at 4.2%, historically low, but economic inactivity due to long-term sickness has risen sharply since 2020. The challenge lies in getting more inactive individuals back into the workforce.
  5. Income and Fiscal Policy: Real household disposable incomes have fallen by £600 between 2021 and 2023, and the government has increased the minimum wage to £11.44 per hour. Fiscal policy has seen increased borrowing during the pandemic, with the deficit slowly reducing, but national debt remains high, contributing to the highest tax burden in 70 years. The Autumn statement included measures like a 10% rise in the minimum wage, a 2% cut in employee National Insurance contributions, and tax incentives for investment in free ports.

Download this PowerPoint

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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