16. Weekly Newsletter

UK Economy Above Pre-Pandemic Levels

Revised figures for January now reveal that UK GDP is 0.3% higher than pre-pandemic levels in 2019. New data also suggests an increased likelihood that growth outpaced forecasts in the first three months of 2023. Last month, the fiscal watchdog warned that Q1 of 2023 would show a 0.4% contraction but this appears to have failed to materialise. Economists labelled this an “accomplishment” but the recovery underperforms that of neighbouring countries and the US- which is 5.1% above Q4 GDP in 2019.

However, growth flatlined in February due to widespread strikes in the services sector- led by education and public administration. A chief economist at KPMG stated that the UK is “likely to escape recession” this year but warned that the medium-term outlook remains “relatively weak by historical standards”. EY drew a more optimistic forecast with a prediction for the economy to “gain traction” in the second half of the year with support from “falling household energy bills and the impact of the fiscal loosening announced in the Budget”.

Newspapers & Parliament

The UK’s front page news cycle over the last seven days has covered a wide range of topics with President Biden’s visit to Northern Ireland dominating headlines. Coverage of the upcoming coronation of HM King Charles III continues to build as Saturday 6th May nears. Some of the newspaper front pages over the last week were:

• The Daily Telegraph: Pressure grows on Sturgeon to quit SNP
• The Mirror: Vapes Sold Illegally To Kids
• The Sunday Telegraph: ‘Deadly’ smart motorways scrapped
• Independent Weekend: Nurses strike to hit cancer care and A&E as Sunak pay offer rejected
• Financial Times: EY warns UK arm of fresh cutbacks after failure to split
• The Guardian: Biden pledges $6bn investment if Stormont power sharing restored
• The Times: Northern Irish peace is my priority, vows Biden
• The Independent: World economy in peril: as UK heads for worst growth in G7
• Financial Times: EY ditches break-up plans after US partners turn down Project Everest

This week MPs will spend two days on the Finance Bill which will work to enact changes announced by the Chancellor in the Spring Budget. Next week (25th April) parliament will also discuss the report stage for the Illegal Migration Bill which aims to reduce the number of small boats transporting migrants across the English Channel. In the House of Lords the Sunak government is continuing to lose votes with the ‘Retained EU Law Bill’ set to be delayed. This bill sets a “sunset” date (at the end of 2023) after which remaining laws inherited from the EU will lapse and thus allow for ministers to rewrite these. Other issues in the Lords’ agenda includes the Online Safety Bill, the Energy Bill, the Northern Ireland Legacy Bill and the soon to arrive Illegal Migration Bill.

Bank of England Monetary Policy Committee

The Chancellor, Hunt, has appointed centrist economist Megan Greene to the Bank of England’s (BoE’s) interest rate-setting committee from July. The group is made up of nine members and the new ‘voter’ is expected to push the balance of argument on the panel away from pushing to reduce interest rates. The American economist, who is also the global chief economist at Kroll Inc., will serve a three-year term with the BoE panel.

Hunt described the new appointee as holding “wide experience across financial markets and the real economy”. The committee is comprised of five BoE employees and four external members who are responsible for brining independent thought to the group. Greene is replacing Tenreyro and thus removes a member who has regularly voted not to raise interest rates as quickly as the committee has proposed since the current cost of living crisis.