But there are signs of recovery in certain sectors ...
Posted by Roger Eddowes on 24/08/2023 @ 8:00AM
The UK's economy is currently experiencing a series of unpredictable ups and downs. Over the past few weeks, there have been significant fluctuations in the economic landscape ...
While there are signs of the UK economy recovering in certain sectors, challenges persist!
While there was an expectation that the economy would stabilise, especially with inflation dropping below 7% in July, underlying inflation measures, such as core inflation, remained consistent with June's rate. This has raised concerns among experts who set interest rates, as they focus more on these enduring forms of inflation rather than the temporary dips and rises.
"Financial markets have also shown signs of apprehension!"
Ten-year gilt yields, which indicate the cost of decade-long loans to the government, have surged to their highest since the 2008 financial crisis. This suggests that the markets are beginning to view the UK as more susceptible to inflation compared to other countries. Moreover, there's a growing anticipation of further interest rate hikes in the coming months.
The economic dance is not just limited to inflation and interest rates. On the High Street, while some businesses like Wilko face administration, others like Marks & Spencer report higher-than-expected profits. The leisure industry is booming for some, but construction firms, even those working on major projects like Premier League stadiums, are grappling with rising costs.
In local supermarkets, the impact of inflation is evident. Prices of everyday items are on the rise, and store owners are constantly adjusting them. For instance, a chocolate bar that cost £1 and then increased to £1.25 in spring is now priced at £1.35. This price hike aligns with the current inflation rate of 7%.
"The Bank of England's role, traditionally, has been to regulate the economy before it overheats!"
However, the current situation is complex. While there are areas of the economy experiencing rapid growth, suggesting the need for higher interest rates, such rate hikes could adversely affect those with significant mortgage debts and companies in debt. This could lead to perceptions of inequality, where one section of society feels the brunt of decisions made due to another section's actions.
While there are signs of recovery and growth in certain sectors, challenges persist, making the path to economic stability a bumpy one.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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