Britain’s economy is poised to outstrip that of Germany in the coming years, with European countries hampered by the sluggish eurozone, experts have predicted.
Economists at investment bank UBS believe Europe’s economic powerhorse will see modest growth of 0.5 percent in 2024, and 0.8 percent the year after.
By contrast, Britain is on course to grow by 0.6 percent and 1.5 percent respectively during same time frame, with inflation falling more rapidly than currently projected by the Bank of England. The eurozone meanwhile will grow by 1.2 percent in 2025.
Furthermore, UBS tips the British economy to grow by 1.3 percent in 2026, outpacing the eurozone (1.1 percent) and particularly Olaf Scholz-led Germany (0.9 percent).
The growing confidence was underscored earlier this month by the revelation that traders are betting on interest rates being cut from the current rate of 5.25 percent to 3.5 percent by the end of next year.
Speaking to The Daily Telegraph, said Germany’s manufacturing was “especially weak”, with new orders being “dragged down” by reduced Chinese demand.
He added: “In addition, the energy crisis continued to leave its mark as production in energy-intensive industries was much weaker than in other sectors, even as energy prices declined.”
By contrast, the UK will be boosted by “the recovery in real incomes amid declining inflation”, Mr Cluse suggested.
The International Monetary Fund (IMF) is also predicting that Britain will outperform both Germany and the eurozone as a whole in almost every year until 2028.
While the UK economy shrank in the three months to September, Deutsche Bank economist Sanjay Raja believes it will bounce back by the end of 2024.
He said: “There are good reasons to be optimistic that we can dodge a recession.
“We will see a sustained period of real positive wage growth in the midst of rapidly falling inflation. That in and of itself will be a boon for households.”
Britain’s economy had proven to be “surprisingly resilient” to high interest rates, Mr Raja continued.
He said: “Household and corporate balance sheets are still very strong. It is not just the excess savings picture that gives us some confidence that households and corporates can weather the shocks and headwinds from tighter monetary and fiscal policy.
“It is the fact that debt ratios are still historically pretty low compared to the past couple of decades.”
Earlier this month The Bank of England stressed that the job of bringing inflation back to its two percent target is far from finished and has downplayed hopes of an imminent interest rate cut.
With energy price falls less steep and other cost pressures remaining, the BoE is forecasting that inflation will not return to target for another two years.
Sandra Horsfield, an economist at Investec, said: “Declaring victory over inflation remains a more remote prospect in the UK than in the US or indeed the eurozone, both of which are visibly closer to target inflation, with lower ‘core’ inflation too.
“The pain this entails for households is clear, which the Bank of England is all too aware of. This month, we expect to see further evidence that inflation is heading back down again. But that progress is likely to be fairly gradual.”
