“The UK economy has lost momentum”
New data from the Office for National Statistics (ONS) shows that the UK economy flatlined in February as strikes by public sector workers weighed on growth. Despite consensus estimates from a poll of economists forecasting a 0.1% increase in the month. The flat month-on-month performance can be attributed to the offsetting of construction growth by striking workers.
In more positive news, ONS revised up its estimate for January’s economic growth from 0.3% to 0.4%, meaning the UK is well positioned to avoid contraction in the first quarter of this year. This upward revision means the economy would need to reduce by 0.6% in March for Q1 to record a contraction. In response to the data release, Chancellor Jeremy Hunt said the economic outlook was “brighter than expected” with the UK “set to avoid recession.”
Suren Thiru, Economics Director at the Institute of Chartered Accountants in England and Wales (ICAEW) expects recession fears “are likely to stalk the UK for some time” as borrowing costs and higher taxes offset falls in inflation and government support for energy bills. She commented, “These figures suggest that the economy has lost momentum as sky-high inflation and strike action continue to drag on key drivers of UK GDP, notably services and industrial production… a struggling economy and strong likelihood of materially lower inflation should give the Monetary Policy Committee sufficient scope to keep rates on hold next month.”
Last week the International Monetary Fund (IMF) cautioned in their latest World Economic Outlook that they expect the UK to be one of the most poorly performing major economies in 2023, with expectations of a 0.3% reduction. The UK and Germany are the only two G7 countries predicted to contract this year.
Banknote demand at 20-year low
Worldwide demand for banknotes is at its lowest point in 20 years, according to De La Rue, which produces a third of the world’s banknotes. With the rise of card and contactless payments, cash usage has fallen sharply in the UK. In 2017, debit cards overtook cash as the most popular payment method for the first time; only 15% of payments are now made in cash, compared with 60% a decade ago.
Unemployment rate rises again
Job vacancies have fallen for a ninth consecutive month, according to latest official unemployment data released by ONS on Tuesday. The uncertain economic outlook is impacting job certainty, the figures suggest, but the employment rate edged up to 75.8% in the three months to February.
About 220,000 more people were seeking work between December and February than in the three previous months. In the same period, however, the unemployment rate rose to 3.8%, up slightly from 3.7% in the previous quarter.
Annual growth in regular pay, excluding bonuses, was 6.6% between December and February, ONS said. However, with prices rising at more than 10% in recent months, regular pay fell by 2.3% when adjusted for inflation.
A new tax year has begun and with it comes the chance to start your tax planning early, but why rush when there’s almost a year to go? Here are a few reasons:
- You can take advantage of various tax allowances available for the year, such as your Individual Savings Account (ISA) and pension annual allowances
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- If you can’t invest a lump sum, you can set up a regular payment into your ISA or pension, to spread the cost over 12 months
- Avoiding the last-minute rush allows you to get everything done
- You can establish a system for keeping track of all your income, expenses and other financial transactions throughout the year, helping you to budget
- There is time to research your options and get financial advice to make informed decisions.
Why not get the new tax year off to the best start – get in touch.