The UK economy faces unprecedented pressures, with high inflation posing a long-term threat to economic growth, as well as quality of life. Fresh figures surprised the market by showing the economy flat-lining month-on-month in July. Naturally, this stagnation baffles and concerns analysts. With the Autumn Budget due in November, this isn’t helping to inspire confidence among businesses. In addition, companies are leaving themselves open to greater economic stress in the future.
Inflation in the UK is still well above these kinds of levels – officials are shooting for an inflation rate of 2%. The latest figures indicate that rising inflation, coupled with easing wage growth and increased household bills, is squeezing UK consumers. This scenario creates deep uncertainty about consumer spending and economic health in the months ahead.
Unfortunately, this April tax increase has only added to the burdens already faced by businesses. Most companies have already been driven out of business or are figuring out how to survive in this new world of rising costs. The unpredictability of the next budget only complicates things. Analysts note that cracks in the UK economy are beginning to show, highlighting a need for strategic changes to foster growth.
As companies look towards the next budget expected in March, confidence is still fragile. The Chancellor has a will to take further action to fill the public finances hole. This could put additional strain on the supply chain and consumers. We’re still awaiting a full picture from the short third quarter, but the outlook is grim. Stakeholders have been on pins and needles awaiting next Wednesday’s release of all-important inflation readings.
The swap markets are still pricing in at least a small possibility of more easing this year. Economists believe these moves will depend on major shifts in the next consumer price index, due out early September. UK authorities have been clear on their preference to get CPI inflation down to the 2% target before any talk of cuts. Until then, the persistent inflation rates will keep hurting consumers and businesses alike.