11 September 2024
If you are covering the latest UK GDP figure, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“The UK economy was expected to continue to show modest momentum, but signs suggest that the growth from the first half of the year is now stuttering. July’s estimate has shown the UK economy had no growth, with growth for the previous three months coming in slightly below expectations at 0.5%. Given the mood music emanating from the government and the economic inheritance it has received from the Conservatives, the government needs to be careful not to overcorrect with its narrative around tax rises and the potential this has to put off investment.
“This month may just be a blip however, given recent positive noises that have been sounded about the state of the wider economy, especially as rate cuts will continue to be delivered over the coming year. Expectations for the UK economy have gradually shifted higher, with the IMF now forecasting UK GDP growth of 0.7% in 2024, up from 0.5% previously, whilst another measurement of economist forecasts has seen it rise from a low of 0.3% in March to 1% currently. The government will hope today’s figure does not dampen those forecasts.
“This improving economic outlook has been somewhat overshadowed by the weak state of the public finances resulting in the Labour Party receiving a muted welcome from investors keen for economic and political stability in a world where this is currently in shortage – although today’s announcement of investment by Amazon’s cloud business will be welcomed. Tax rises have been flagged ahead of the Autumn Budget, and consumers and businesses may feel rather more cautious heading into the winter months as they await details from the Treasury. Whilst retail sales data has indicated a pick-up in activity in recent weeks, some of this is down to slow spending earlier in the summer.
“That said, there are signs that solid, if unspectacular, economic growth is returning to the UK even after today’s disappointing figure. However, it is vital that this isn’t extinguished given Labour’s desire for wealth creation and an economic revival. If investors deem the tax rises to be too punitive, there is a chance investment goes elsewhere and economic growth becomes harder to come by once again.”
