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- Economy in brief: October 2023
Economy in brief: October 2023
Your October guide to the UK economy, giving you a monthly overview of the major trends impacting the UK's main business sectors.
Autumn brings unsettled economic conditions
Resilient economic data has recently driven markets to accept that central banks are unlikely to bring down rates any time soon, with rates likely to plateau at their highest levels since the financial crisis. US Treasury yields reached a 16 year high on 6th October following the publication of unexpectedly strong jobs data in the US. Markets in the UK and Eurozone have mirrored US trends, although to lesser degrees, given that growth performance is more lacklustre in both regions. These developments in the near-term raise borrowing costs for government, particularly pertinent in the UK as we look towards the Autumn Statement on the 22nd November. However, it is worth noting that UK public sector borrowing this financial year is £11.4 billion below the OBR’s Spring forecast, reflecting stronger than expected pay growth driving income tax receipts, while strong VAT receipts are likely to reflect strong real-terms consumer spending and strong inflation.
IMF update highlights ongoing risks to the outlook
The IMF have published their latest update on the global outlook, just days after the distressing developments in Israel. The IMF points to ongoing weakness in global growth, which it expects to drop from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024, well below the historic (2000–19) average of 3.8%. The growth prospects of developed economies are particularly weak, with growth for those regions expected to come down to 1.5% in 2023 and 1.4% in 2024 from 2.6% in 2022. By contrast, growth in developing economies is expected to be stable at around 4% across 2023 and 2024, matching 2022 growth rates – the impact from conditions in China’s property market knocks 0.1% points off global growth this year. The UK gets a pretty downbeat projection, with growth in 2024 at 0.6% marking little improvement on the 2023 expectation of 0.5% marketing the UK with the weakest growth amongst advanced economies in 2024. It’s worth noting though that these projections do not take on board the ONS’s recent substantial revisions to GDP. The IMF highlights several global headwinds to growth: tighter monetary and fiscal policy; long-term consequences of the pandemic; the Ukraine war; and geo-economic fragmentation.
UK political parties set out their stalls
Party conference season has seen the parties focussed principally on driving up the country’s growth prospects. Unfortunately, Conservative party conference headlines were dominated by the cancellation of HS2’s northern leg, albeit accompanied by the hastily cobbled together list of alternative investments. The Labour party spoke with encouraging passion about driving business investment. Following significant engagement on these issues from our recent regional council round, we were particularly pleased to hear of their focus on planning, infrastructure delivery and grid capacity (all interlinked of course). We were a little less convinced on their suggestion of windfall taxes and some of their approach to business rates. For all parties, we continue to recommend an approach to taxation, and indeed government policy making in general, which delivers much-needed stability and predictability to underpin business planning as the global economy continues to battle high inflation, conflict-led instability and financial market risk.
Economy in brief: October 2023


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