EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
Recent Searches
Press release
23 Jul 2024
|
London, GB
UK economy had a strong start to 2024 with more GDP growth to come
- The EY ITEM Club Summer Forecast expects the UK economy to grow 1.1% in 2024, up from the 0.7% growth projected in April’s Spring Forecast
- Annual GDP growth is predicted to reach 2% in 2025 and 2026
- Inflation is forecast to average 2.5% this year, slowing to 2.2% in 2025
- Bank Rate is expected to be cut to 4.75% by the end of 2024, with the first cut predicted to be made in September
UK GDP is predicted to grow by 1.1% this year, faster than previously thought, thanks to a stronger-than-expected start to 2024, according to the EY ITEM Club Summer Forecast.
EY ITEM Club Summer Forecast - July 2024
The EY ITEM Club predictions are a significant upgrade from the 0.7% predicted in April’s Spring Forecast and the modest 0.1% GDP growth seen in 2023. The latest forecast also expects this economic momentum to accelerate further next year with 2% GDP growth expected in 2025 and in 2026.
Although the slowdown in wage growth is forecast to persist, real household incomes are expected to continue to rise substantially thanks to lower inflation. The EY ITEM Club predicts Consumer Price Index (CPI) inflation to remain around the Bank of England’s 2% target over the coming years, with an average of 2.5% in 2024, falling to 2.2% in 2025. This is expected to boost household spending power, which in turn is forecast to be the main driver of stronger economic activity for the UK over the next two years.
Lower inflation is also expected to prompt the Monetary Policy Committee (MPC) to reduce Bank Rate to 4.75% before the end of 2024, with the EY ITEM Club predicting that the first interest rate cut will come in September and be followed by a further cut in November. This is a slight downgrade on the Spring Forecast prediction that Bank Rate would fall to 4.5% by the end of the 2024, due in part to ongoing stickiness in services inflation.
Hywel Ball, EY UK Chair, said: “The opening months of 2024 delivered a stronger than anticipated economic performance and, with inflation predicted to remain relatively stable and consumer spending set to climb, growth should continue. The UK’s economic recovery is underway, but it’s expected to be more steady than spectacular.
“Brighter conditions are expected to be matched by a rise in business investment in 2024, followed by an even more significant uptick next year. This would continue the UK’s strong post-pandemic performance in private sector investment and, alongside consumer spending, should be a key driver of national growth going forwards.”
UK consumer spending expected to improve but tight fiscal policy could limit growth
The EY ITEM Club expects solid household income growth and a less cautious approach from consumers going forward, to result in 0.8% growth in consumer spending this year, and 2.5% in 2025.
While prospects for consumer spending appear relatively positive, they are likely to be tempered by the lagged effect of past monetary policy tightening on households. Nearly four million borrowers are set to see mortgage costs rise by the end of 2026 and while this should be manageable for most homeowners, it is still predicted to limit the pace of GDP growth.
Tight fiscal policy is also expected to limit GDP growth. The new UK Government has pledged to follow the existing fiscal rule which requires reducing the public sector net debt-to-GDP ratio in the fifth year of the rolling forecast. This will mean the Government is likely to implement previously planned tax rises and maintain a low level of public sector spending, which could include cutting the level of UK public investment over the next five years.
Peter Arnold, EY UK Chief Economist, said: “Improved consumer spending will help power economic momentum in 2024 and into next year, but government and business spending will also have a significant effect on growth. By upholding the net debt rule and initially presenting a range of relatively modest, fiscally-neutral measures, the new UK government appears to be maintaining the tight fiscal approach established by the previous administration. This will likely keep public investment comparatively low, restraining GDP growth in the short term and limiting growth potential further into the future. The policies unveiled in the coming months, particularly those announced at the Autumn Budget, will determine whether UK GDP exceeds this forecast and moves from restrained to faster levels of growth.
“Combining higher public investment with a concerted effort to build on the UK’s recent success in business investment could provide an economic shot in the arm. The new Government has an opportunity to reassert the UK’s reputation as an appealing, politically stable destination for private sector capital, and investors will likely pay close attention to the coming months of policy discussions, particularly in areas such as planning reform. This has been promised by previous governments, but meaningful change to the planning system could accelerate the rate at which major projects move from concept to construction, providing investors with greater confidence in the UK’s ability to provide timely returns.”
UK business investment outlook continues to brighten
The EY ITEM Club remains positive around business investment prospects. With the Bank of England expected to cut interest rates later in the year, the UK is likely past the peak squeeze from higher debt servicing costs, implying a brightening outlook.
Business investment is now expected to grow by 1% in 2024, up from expectations of 0.6% growth in April’s Spring Forecast. The EY ITEM Club continues to predict more significant growth of 3.2% in 2025, in line with previous expectations.
Risks to UK’s economic forecast
Ongoing geopolitical tensions present a risk to the forecast, with the potential for upside surprises in energy, oil, food and transportation prices as a result, which could increase inflation. Meanwhile, with more than half of the world’s population set to vote in national elections this year, significant policy change could take place in some of the world’s largest economies, with potential knock-on effects for the UK.
Conversely, there is also a possibility that inflation may fall quicker than expected, particularly if the labour market cools more quickly than expected. This could mean that the rate of GDP growth exceeds the predictions made by the forecast.
Related news
UK economy had a strong start to 2024 with GDP growth
The EY ITEM Club Summer 2024 Forecast for the UK economy, including mortgage rates, interest rates, GDP, inflation, house prices and unemployment.
Foreign Direct Investment: UK's project total grows as Europe’s falls
Foreign direct investment (FDI) in UK has grown with its European share of FDI increasing, largely driven by resurging digital investment.
UK remains Europe’s leading destination for Foreign Direct Investment in Digital Technology
The UK attracted more digital technology Foreign Direct Investment (FDI) projects than any other country in Europe last year, according to EY’s 2024 UK Attractiveness Survey.
Scotland GVA forecast to edge upwards as employment headwinds remain
The EY ITEM Club Scottish Spring Forecast sets out latest economic performance and predictions for Scotland, including GVA, labour market, inflation, interest rates and sector forecasts.
Scotland household finances to improve with interest rates cut
The EY ITEM Club Scottish Winter forecast on Scotland’s economy, includes Scottish GVA, employment and the breakdown of sector performance.
UK economy stagnation should start to fade in 2024, says EY ITEM Club
The EY ITEM Club Winter Forecast for the UK economy, including mortgage rates, interest rates, GDP, inflation, house prices and unemployment.
High interest rates weigh on GDP, but the UK should still avoid recession, says the EY ITEM Club
The EY ITEM Club’s Autumn 2023 Forecast for the UK economy, including mortgage rates, interest rates, GDP, inflation, house prices and unemployment.
The EY ITEM Club’s Summer 2023 Forecast for the UK economy, including GDP, inflation, house prices, unemployment and interest rates.
Scotland’s foreign investment grows with record results
The EY UK and Scotland Attractiveness Survey 2023 details why Scotland is an attractive FDI location, including the top sectors and investment origins.
Foreign Direct Investment: UK's project total grows as Europe’s falls
EY’s 2023 UK Attractiveness Survey reveals the UK ranks second in Europe for the number of Foreign Direct Investment (FDI) projects hosted in 2022.
The EY ITEM Club’s Spring 2023 Forecast for the UK economy, including GDP, inflation, house prices, unemployment and interest rates.
EY’s Scottish ITEM Club Forecast 2023 evaluates the current economic performance and future predictions for the Scottish economy, including GVA growth.
Cost of living pressures set to intensify the UK’s regional economic divide, finds latest EY report
EY’s Regional Economic Forecast compares the expected economic performance of the UK’s towns, cities, regions and nations
0.7% contraction in UK GDP now expected for this year – a downwards revision from the 0.3% contraction expected in October’s Autumn Forecast.
UK economy expected to be in recession until summer 2023, says latest EY ITEM Club forecast
High energy prices, elevated inflation, rising interest rates and global economic weakness mean the UK economy is expected to be in recession until the middle of 2023, according to the new EY ITEM Club Autumn Forecast.
IPO activity on London stock market saw steady growth in H1 2024
The London Stock Exchange attracted eight new companies in the first half of 2024.
Annie Graham appointed as EY UK head of audit
EY has appointed Annie Graham as the UK Head of Audit. Annie will lead a team of more than 6,000 professionals delivering high-quality audits in the UK.
EY reports record UK revenues of £3.8bn
EY achieved strong growth across all of its service lines in the UK. Tax revenues grew by 20%, Consulting 18%, Assurance 17% and Strategy and Transactions by 8%.
Doris Hsu from Taiwan named EY World Entrepreneur Of The Year™ 2023
MONACO, 9 June 2023 – Doris Hsu, Chairperson and CEO of GlobalWafers Co., Ltd., was named the EY World Entrepreneur Of The Year™ 2023 at an award ceremony held in Monaco's Salle des Etoiles.
GDP saw a better end to 2022 – EY ITEM Club comments
Martin Beck, Chief Economic Advisor to the EY ITEM Club, reacts to GDP data for Q4 2022.
Personal taxes – A quiet day as the Chancellor hunts for growth: Spring Budget
For personal tax measures, no changes to the already-announced tax rates and thresholds across income tax and capital gains allowances.
Strikes continued to hold back GDP in January – EY ITEM Club comments
Martin Beck, Chief Economic Advisor to the EY ITEM Club, reacts to the GDP statistics for January.
EY ITEM Club comments: Autumn Statement, Thursday 17 November 2022
Martin Beck, chief economic advisor to the EY ITEM Club, says
Banking Surcharge: Autumn Statement, Thursday 17 November 2022
Richard Milnes, UK Banking Tax Partner at EY, comments on the banking surcharge announced at the Chancellor’s Autumn Statement
Electric vehicles to be taxed from 2025
Tom Evennett, EY UK&I Family Enterprise Leader, comments on the Chancellor’s announcement on Electric Vehicles
Solvency II: Autumn Statement, Thursday 17 November 2022
Loic Bellettre, Partner and EMEIA Capital Leader at EY, comments on Solvency II reforms announced at the Chancellor’s Autumn Statement
A tax raising statement, but not for a while
Chris Sanger, EY’s Head of Tax Policy, comments the Chancellor’s Autumn Statement
Tom Evennett, EY UK&I Family Enterprise Leader, comments
Chris Sanger, EY’s Head of Tax Policy, comments the Chancellor’s Autumn Statement
Energy efficiency: positive news but access for households needs to be pragmatic, practical and easy
Rob Doepel, EY’s Managing Partner for Sustainability, UK & Ireland, comments
Relief for homebuyers as Stamp Duty relief announced in emergency Budget remains until March 2025
Tom Evennett, EY UK&I Family Enterprise Leader, comments on the decision to retain SDLT relief
Capital Gains Tax: Changes to CGT set to raise £1.5bn
Tom Evennett, EY UK&I Family Enterprise Leader, comments on Capital Gains Tax
EY Liverpool welcomes new recruits from local universities and colleges
EY’s Liverpool team has doubled in size over the last 5 years, with new recruits from local colleges & universities growing the firm’s office in the city.
EY has today announced the acquisition of specialist customer consultancy Blackdot Consulting Ltd (Blackdot) to strengthen EY transformation, customer and growth capabilities.
EY announces substantial growth plans for its Consulting business
EY has today revealed plans to double the size of its UK and Ireland (UK&I) Consulting practice in the next four years, backed by £75m of investment. This is in addition to the £95m that the firm has already invested in its Consulting practice since 2020.
Ernst & Young LLP (EY) announced today that CMA Strategy Consulting (CMA) has joined the EY-Parthenon organisation, elevating its strategy and transaction-focused offerings and solutions across the digital infrastructure space and the technology, media and telecom (TMT) industry more broadly.
EY named founding member of Skills Taskforce for Global Britain
New taskforce aims to improve the quality of the UK’s skills economy to help attract inward investment to the UK
EY announces acquisition of UK technology business, Pythagoras Communications Holdings Limited
EY has today announced the acquisition of Pythagoras Communications Holdings Limited (Pythagoras), a leading UK technology company and Microsoft Gold Partner. Pythagoras provides professional services and solutions using technology platforms including Microsoft Azure, Dynamics 365, SharePoint and the Power Platform.
UK FDI attractiveness dips amid COVID-19 but remains resilient as investor priorities shift
30-45% fewer FDI projects expected in the UK in 2020 than in 2019, finds EY’s latest UK Attractiveness Survey