“New year but old problems for the UK economy” says Yael Selfin, Chief Economist at KPMG UK.
“The economic outlook currently remains gloomy, with a technical recession still potentially on the cards in the second half of 2023, especially given the expected impact from the industrial action in December. Nonetheless, even if the economy manages to avoid a recession, it is expected to remain in stagnation territory.
“Manufacturing recovered somewhat after it was hit by the impact of high interest rates and weakening global economic activity, while construction is experiencing difficulties from a slowdown in housebuilding. The hope is that the outlook ahead will brighten as mortgage rates continue to fall, improving affordability dynamics.
“The second half of the year could see fortunes changing for the UK economy, with inflation expected to continue to normalise. This could raise the prospect of earlier interest rate cuts, with the Bank of England likely to be wary about the risk of overtightening given the weak economic backdrop.”
