Did you have a great summer? It wouldn’t be very British not to discuss the weather, but quite frankly, there was nothing noteworthy to discuss about the weather. It was what it was. But what about our economy? We have seen a new government come in, a cut in interest rates, some growth during the last two quarters, and house prices at a two-year high etc. So, you have to ask: has the UK economy recovered?
Consumer confidence seems to be high, possibly due to the new government and their change in direction. Inflation now seems to be under control, so people are more in control of their finances. However, we may see another rise in the inflation rate. So, has the UK economy recovered and avoided recession?
The Office of National Statistics (ONS) has confirmed that the UK economy grew by 0.6 % in the second quarter of 2024, following a growth of 0.7% in Q1. This means the UK will be the fastest-growing economy in the G7 for the first half of 2024.
The growth, mainly in the service sector, was largely driven by events such as the Taylor Swift Eros tours and the Euros. There was also strong growth in the IT , legal and scientific research industries. Interestingly, the manufacturing and building industry outputs actually decreased during the same period.
Generally, as we head into the Autumn, there is quiet confidence in the air. This has been the main reason for the UK economy growing albeit with very low growth rates. There is, however, a budget coming up in October, and we’ve all been warned about the £22bn hole in the public finances.
What are the other ongoing problems?
We appear to be struggling with productivity, as the output per hour worked remains low. Productivity, measured by the ONS in the second quarter up to 30th June, fell compared to the same period last year, which is a worrying trend. For the UK economy to truly recover, we need to see an increase in productivity.
Small businesses like yours need to ensure they are taking advantage of all the automation and new processes available. We are happy to discuss this with you. If you are concerned about your business’s productivity levels, perhaps we can help. We are experts at examining business processes and systems, including financial systems, and can recommend improvements. Contact your normal manager, and let’s have a conversation.
The second issue is our trade deficit. The UK economy has a trade deficit of £13.3 billion, importing much more than it exports. Most of this is still a fallout from Brexit as we are still in the middle of reaching trade deals with the rest of the world.
Staff shortages, especially those with the right skills, also remain an issue. Most of you have expressed this to us when we talk.
What’s interesting, though, is that despite maintaining a 4% unemployment rate, the number of vacancies declined in the June quarter. This indicates that the economy is not heating up any time soon.
On a practical level, however, many businesses are still finding it difficult to attract the right people with the right skills. This will, therefore, lead to low productivity in the short term at least.
So what can be done?
As a business, we cannot emphasise enough the importance of having a strong team. When we say “team,” we aren’t referring solely to your staff, but also to your advisors. You need a trusted confidant with whom you can openly share your ideas, aspirations, and concerns.
It’s essential to have someone who can provide you with the financial expertise to reach your goals and isn’t afraid to challenge you when necessary.
We’re here to get serious about you and your business.
Over the coming months
- keep a strong handle on your financial data including your cashflow.
- Invest in your key people and make sure they are keeping up with change in technology
- Work with advisors whom you trust to discuss the finer details of your business
Key Numbers and Data
Some key numbers are going to be released during the next couple of weeks:
- The August inflation figures are to be released on 18th September, and many are expecting another rise, which means the Bank of England might be delayed in decreasing interest rates
- The next Bank of England meeting is on 19th September, but no movement in interest rates is expected
So, to conclude, Autumn 2024 may still have a few things to tell us about our economy and whether it has truly recovered. I am sure you are as keen as we are to hear what Rachel Reeves has to say in the budget, which is set to take place on 30 October.
As usual, we will keep you posted on all the announcements.
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