Despite high inflation and soaring interest rates, the UK economy has remained resilient.
Over the past several months, consumers have faced a myriad of pressures with higher food and energy bills, however inflation is now likely to have peaked and the Bank of England could pause further interest rate hikes.
While the UK economy saw a 0.5% contraction in economic activity according to the ONS, a number of short term factors may have temporarily subdued growth. This included an unusually cold snap at the start of December followed by national strikes in different sectors at the end of last year.
With the cost of living crisis still firmly on people’s minds, the UK is still expected to enter a mild recession in 2023. Growth in the coming months will depend on whether consumer spending remains subdued, or if the easing of inflation will create the conditions for more optimism and investment.
On the other hand, the UK’s overall job picture still looks robust, with shortages being felt in many industries and near 40-year low unemployment levels. This also follows a rosier picture in the U.S. which added more than 500,000 new jobs in January, an outstanding rebound which could underline the improving global sentiment and Britain’s prospects this year.