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The net giveaway of £13.9bn (0.5% of GDP) in 2024/25 in the Budget may help end the recession before an election later this year. But fiscal policy is still being tightened in 2024/25 and that tightening will continue after the election and will probably …
6th March 2024
We will be discussing what the policies announced in the Budget mean for the economy and the financial markets in a 20-minute online briefing shortly after the Budget at 3pm GMT on Wednesday 6 th March. (Register here .) Using most of the fiscal headroom …
20th February 2024
We will be discussing whether the next government will move the dial on the economy in a 20-minute online briefing at 3pm GMT on Wednesday 13th March. (Register here .) The next general election won’t be as pivotal for the economy or the markets as the …
13th February 2024
Although the recent transition to a higher interest rate climate has not caused any lasting or systemic financial flare ups, it is probably too soon to sound the all-clear. And while a higher interest rate climate in the medium-term will reduce …
8th February 2024
The key indicators that have usually convinced the Bank of England to cut interest rates suggest the first cut could come in Q1 2024. That said, rates have risen to a lower peak than most models suggest, which implies they need to stay higher for longer …
30th November 2023
The net giveaway the Chancellor announced in the Autumn Statement is designed to curry favour ahead of an election late in 2024. However, fiscal policy is still being tightened in 2024/25 and it looks as though whoever wins the election will have to …
22nd November 2023
During the past decade, the global economy has transitioned out of an era in which globalisation was the key driver of economic and financial relationships into one shaped by geopolitics. Previously, most governments had believed that closer economic …
16th November 2023
With the government still languishing far behind in the opinion polls and an election required before the end of January 2025, the Chancellor, Jeremy Hunt, is under more pressure than ever to pull something out of the bag at the Autumn Statement on …
15th November 2023
One key lesson from the bouts of inflation in the 1970s and 1980s is that core inflation faded only once a loosening in the labour market drove down the job vacancy rate to more normal levels. We estimate that a fall in the job vacancy rate from 3.0% in …
2nd August 2023
Note: We discussed our revamped FCIs and took your questions on global financial conditions in a 20-minute online briefing on Thursday, 20 th April . Watch the recording here . We have revamped our financial conditions indices (FCIs) for advanced …
18th April 2023
The Budget has taken a bit of a backseat given the renewed worries about the health of the global banking system, but the Chancellor, Jeremy Hunt, was a bit more generous than we expected and probably plans to splash more cash ahead of the 2024/25 …
15th March 2023
We expect the Spring Budget on 15 th March to contain some giveaways confined to 2023/24. But a downgrade to the Office for Budget Responsibility’s (OBR) medium-term GDP growth forecasts will prevent an unwinding of the £54bn (1.8% of GDP) of fiscal …
8th March 2023
Labour’s big lead in the polls raises the question of what difference a Labour government would make to the economic outlook. The answer is probably not much. A tight grip on the public finances is likely by whichever party is in charge. And the …
9th January 2023
In his Autumn Statement, the Chancellor, Jeremy Hunt, appears to have pulled off the tricky task of reassuring the financial markets of the government’s fiscal discipline while also managing not to deepen the recession. Our economic forecasts suggest he …
17th November 2022
We’ll be discussing the implications for the economy and the financial markets of the Autumn Statement in a 20-minute online briefing at 4pm GMT on 17 th November. (Register here .) In his Autumn Statement on 17 th November the Chancellor, Jeremy Hunt, …
10th November 2022
While the UK government’s apparent U-turn on fiscal policy offers some hope of relief for sterling, we think the outlook remains precarious. We continue to expect that sterling will lose further ground against the US dollar in the near term. But while …
20th October 2022
As the new Chancellor, Jeremy Hunt, unveils whether, when and how he will put public debt on a sustainable path in his Medium-Term Fiscal Plan on Monday 31 st October, the big question will be whether his actions will be enough to restore credibility …
The Chancellor, Rishi Sunak, provided more support to the economy than we had expected over the next few years in today’s Spring Fiscal Statement, but he could have gone further in 2022/23. Instead, he chose to bank some extra cash so there’s scope for …
23rd March 2022
The Chancellor, Rishi Sunak, will use his Spring Statement on 23 rd March to soften the blow for households facing rising energy and food costs. However, any hopes that he will announce a big handout may be disappointed as he tries to strike a balance …
16th March 2022
We think that most of the fall in the size of the UK’s labour force since the onset of the COVID-19 pandemic should eventually be reversed. Even so, we wouldn’t be surprised if this took another two years or so. That suggests to us that the labour market …
14th March 2022
This Budget was perhaps more notable for what the Chancellor didn’t do rather than what he did. The OBR handed Rishi Sunak a significant upgrade to its forecasts for the public finances but, while the Chancellor spent some of the windfall a substantial …
27th October 2021
The interactions between Brexit, the deterioration in Scotland’s fiscal situation and the continued lack of an easy option for the currency have made the economics of Scottish independence even more challenging than at the time of the first referendum in …
7th September 2021
The widely reported labour shortages should mostly prove temporary. While it may take 6-12 months before some of the underlying causes unwind, recruitment difficulties probably won’t have a long-lasting upward impact on wage growth. As such, they …
8th July 2021
We think there’s a good chance that when the Bank of England’s Monetary Policy Committee (MPC) starts to tighten monetary policy it will do it by unwinding some quantitative easing (QE) before it raises interest rates. That would be consistent with the …
22nd June 2021
The economic recovery from the COVID-19 crisis may not push CPI inflation above 2.0% for a prolonged period until 2023, although there is a risk that it happens sooner. And further ahead, the government’s desire to use fiscal policy to achieve its …
22nd March 2021
While most governments are focussed squarely on maintaining or increasing fiscal support for their economies, in today’s Budget the Chancellor, Rishi Sunak, adopted a different two-staged plan for the UK – spend big for the next two years and tax big for …
3rd March 2021
While policymakers in the US are wrangling about how much additional stimulus is required, the debate in the UK is more about what tax rises are needed to repair the damage to the public finances caused by the pandemic. Admittedly, in next week’s Budget …
25th February 2021
Our view that the recovery from the COVID-19 pandemic will be quicker and more complete than most forecasters expect suggests that the economic legacy of the crisis may not be a permanently smaller economy but instead higher inflation and bigger public …
8th February 2021
At some point, there may need to be a fiscal squeeze to pay for any lasting increase in spending caused by the COVID-19 crisis and increases in age-related spending. But the biggest danger is that fiscal policy is tightened too much too soon to fill a …
8th December 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
As long as social distancing isn’t practised for many years, then those behavioural changes triggered specifically by the coronavirus crisis will probably prove temporary. But those changes that were already underway and which have been supercharged by …
23rd June 2020
The swift and significant response of the Bank of England to the coronavirus crisis has prevented a financial crisis, but we think the Bank will need to do much more than the markets currently expect to get the economy back on track. By this time next …
4th June 2020
The coordinated fiscal and monetary stimulus announced by the Chancellor and the Bank of England today shows that policymakers are pulling out all the stops to ensure that the coronavirus results in the economy following a path over the coming quarters …
11th March 2020
The new Chancellor Rishi Sunak’s first priority in the Budget on Wednesday 11 th March will be to deliver a package of measures to help those areas of the economy likely to be hit hardest by the coronavirus outbreak. He will presumably also get things …
4th March 2020
We think that the coming fiscal stimulus will raise annual GDP growth by about 0.6ppts this year and 0.25ppts in 2021. This is part of the reason why we expect GDP growth to beat the consensus forecast by rising to 1.8% in 2021 and helps to explain our …
3rd February 2020
As the negotiations over the UK’s new relationship with the EU will be arduous and long, business investment probably won’t rise much this year as firms will worry about the risk of there being something similar to a no deal on 31 st December 2020. But if …
23rd January 2020
We suspect that interest rates will neither go up nor down this year! But the markets may be caught out further ahead if, as we expect, a fiscal stimulus and easing in Brexit uncertainty results in interest rates rising above their current rate of 0.75% …
21st January 2020
The election on 12 th December is likely to mark the beginning of a new phase for the UK economy, determining not only the type of Brexit (or if Brexit happens at all) but also the size and shape of the state. The theme that comes up the most is that …
26th November 2019
Although the Office for Budget Responsibility (OBR) won’t expose the full deterioration in the public finances when it updates its forecasts on Thursday, it’s clear that it is only a matter of time before borrowing smashes through the targeted level. That …
6th November 2019
One way or another, the UK is destined for looser fiscal policy. How much and in what form is unclear, but the one thing that is clear is that it will require a new set of fiscal rules. There are many options and we do not know for sure what the …
24th October 2019
A continued decline in the natural rate of unemployment over the past 15 years means that there is probably a little bit more slack in the labour market than indicated by the near-record low unemployment rate. As a result, wage growth is unlikely to …
2nd October 2019
Were the UK an emerging market the hedge fund vultures would already be circling following the rise in the current account deficit to 4% of GDP last year – the largest in the developed world. While the UK won’t have an emerging-markets style balance of …
22nd July 2019
In view of the wider interest, we are also published this Global Markets Focus to clients of our UK Economics Service. While we think that the twists and turns of the UK’s journey out of the European Union will have a bearing on Gilts and sterling, that …
17th July 2019
The strength in consumer spending has been crucial to the economy’s resilience over the past year but there are three reasons why many people think that the consumer sector is living on borrowed time – namely an unfavourable outlook for incomes, low …
15th July 2019
While it is recognised that political developments, such as a no deal Brexit and a Labour government, have the capacity to send the economy in different directions, it’s not as well known that three economic trends are in train regardless – looser fiscal …
11th July 2019
