In EIU’s July 2023 Global Outlook video, Agathe Demarais and Kate Parker discuss prospects for the UK economy.

Although UK inflation is falling, it’s still above average levels in Europe and other major economies at just under 9% year on year – and while GDP grew in April, it was only marginal growth. The Bank of England (BoE, the central bank) remains focused on reducing inflation and will probably continue to raise interest rates well into the third (and maybe even the fourth) quarter of the year, even if this runs the risk of pushing the economy into recession. 

Additionally, increased cautiousness on the part of investors has lifted yields on two-year gilts to over 5%—higher than during the period of volatility in September-October 2022 related to the fiscally expansive “mini budget”. Higher gilt yields cause knock-on problems, not only for the government as a result of costlier borrowing, but also in terms of the housing market

“While there are similar trends of high inflation and low growth in other major economies, it has not been quite as pronounced as it has been in the UK and the rest of Europe. Overall Q1 data for G20 economies have come through much stronger.“

KATE PARKER, SENIOR ANALYST, EIU

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.