March 2024 economic and business overview
March 4, 2024
What next for the UK economy now we’re in a recession?
Economists need ponder no longer, the Office for National Statistics (ONS) finally confirmed that Q4 2023 saw a fall in GDP adding to the negative outturn for Q3, thereby creating a recession which government sources dismiss as no more than ‘technical’.
What it certainly counts as is ‘shallow’ by comparison with some of the more vivid economic gyrations since WW2. Indeed, given the propensity of the ONS to make significant revisions to previous GDP numbers, this could easily turn out to be the recession that never was.
The basic GDP statistics
The raw figures are definitely marginal. Q3 2023 showed a GDP fall of 0.1%, while Q4 saw a dip of 0.3%. For the year as a whole, 2023 produced the thinnest possible GDP rise of just 0.1%. This is not exactly a white knuckle, roller coaster ride. But look at things from a slightly different angle and all isn’t quite so marginal.
GDP per capita
An aspect of the growth statistics given little media coverage was the less pleasant reality that on a per capita basis, GDP fell by a higher figure of 0.7% for 2023 as a whole and fell in every quarter. Our GDP per capita is now 1.1% lower than pre-pandemic in Q3 2019, whilst the EU’s is 2.7% higher and in the USA it is 6% greater. Hiking GDP by growing the population leaves nobody better off.
Predictions for 2024 and 2025
The respected EY Item Club’s latest GDP growth forecast for 2024 is now 0.9%, up from the 0.7% they predicted last October. For 2025 they see a rise of 1.8%, again up from 1.7% in October 2023. But the IMF held their 2024 prediction at 0.5% but raised 2025 to 1.6%. The broader context for this is that the thirty-year trend for the UK is average annual growth of 2.1% since 1994.
Inflation
Inflation also disappointed, sticking stubbornly at 4% for the second successive month in January 2024, although many economists were even expecting a rise. We should perhaps be grateful for small mercies, but also mindful of a comment by a leading industrialist who believes that most major businesses will be looking to increase prices by at least 6% this year. That really could put a spanner in the Bank of England’s slow-grinding works and delay interest rate cuts for even longer.
Business insolvencies
January is never much of a guide to the insolvency trend with its slow start after the festive season and certainly not by comparison with the preceding month and the inevitable rush to get business problems resolved before Christmas. Even so, business failures in January 2024 were 5% higher than in January 2023 and the rolling twelve-month total for the UK as a whole rose to 26,687. The outcome for calendar 2024 could easily threaten the 30,000 barrier, one never reached or breached before.
Political uncertainty
Business leaders are now navigating the turmoil of an election year, with all political parties in full scale campaigning mode and giving out economic promises and optimistic messages like sweets at a children’s party. Business planning is challenging to say the least in this climate, even for the most optimistic entrepreneur.
Businesses across the board, but especially SMEs, will be feeling cash flow pressures from rising costs that are set against a backdrop of stagnated growth. This is a vital time for thorough and frequent financial analysis and forecasting. We have produced a guide on the stages of business decline. Acting on these issues early can make all the different to a business’s prospects.
If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners who can discuss options with you. We have offices nationwide and by contacting us on 020 3326 6454, you will be able to get immediate assistance from our Partner-led team.