UK economy hit by ‘renewed signs of stress’ as growth slows – business live

The “Great British Slowdown” has left families £1,400 poorer, according to the Resolution Foundation this morning.

The thinktank has published a new report, showing how the slowdown in economic change over the last 15 years has left the country poorer.

Resolution argues that the UK economy suffers from a lack of “economic dynamism”, in which weaker firms or lower productivity sectors shrink, while more productive ones grow.

That has left the economy 4% smaller since the financial crisis, the equivalent to £1,400 annual income loss per household.

Greg Thwaites, Research Director at the Resolution Foundation, said:

“The British economy has spent the past 15 years struggling from one major crisis to another. But while many people assume this severe economic turbulence has led to major economic change, in fact the opposite is true. Our economy is instead suffering from a Great British slowdown, which has hamstrung our economy, and left families £1,400 poorer.

“Britain needs more, not less, economic change. We need successful firms to grow, and struggling ones to shrink.

“Policy makers need to start embracing and encouraging economic change, from tax and welfare reforms to competition policy, while always being mindful of the need to properly support those who may lose out in the short term.”

Here’s the full story:

Resolution Foundation are presenting the research at 9.30am this morning:

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Anxiety over the health of the UK economy is rising, as economists fear that high interest rates have hurt growth.

Economists at KPMG have predicted that UK growth will slow sharply in the second half of this year, as high interest rates, continued uncertainty and low productivity weigh on the economy.

They fear the UK could “struggle to keep its head above water in the second half of the year”, as “renewed signs of stress” hit the economy.

KPMG predicts UK growth will slow to just 0.4% this year, down from 4.1% in 2022, and slow further to just 0.3% in 2024.

Inflation is expected to slow, from 9.1% last year to 7.5% in 2023, and then 2.7% in 2024, thanks to easing supply chain bottlenecks and falling energy prices.

Concerns over the UK economy prompted the Bank of England to leave interest rates on hold at 5.25% last Thursday, after 14 consecutive rises in borrowing costs.

The OECD has also predicted weak growth for Britain – last week it predicted the economy would grow by 0.3% in 2023, and by 0.8% in 2024.

And last Friday, industry data showed that Britain’s economy suffered a sharp fall in private sector activity this month.

But, as KPMG points out, the global economy seems to be losing momentum too, with trade volumes shrinking and rising concerns over China’s economy.

There’s another risk too – businesses may be put off from investing in the UK until the general election has taken place. Uncertainty over the government’s fiscal plans, and key policies, risk deterring or delaying spending.

Yael Selfin, chief economist at KPMG UK, says:

“While interest rates have now potentially reached their peak in this cycle, uncertainty remains regarding their future path.

This coupled with uncertainty around future plans for fiscal policy as the UK heads into an election year, may see businesses choose to further delay investment.”

KPMG predicts the upcoming general election will prompt new spending pledges to, for example, address safety concerns around school buildings or patch up the deficits run up by some local authorities.

The agenda

• 9am BST: German IFO institute’s business climate index

• 11am BST: CBI distributive trades survey of UK manufacturing

• 1.30pm BST: Chicago Fed national activity index for the US economy

• 2pm BST: ECB president Christine Lagarde testifies to the Committee on Economic and Monetary Affairs of the European Parliament