Published On: Sun, May 12th, 2024
Business | 3,674 views

Bad news for UK economy as expert warns of ‘lacklustre’ growth | Personal Finance | Finance


The UK economy may have returned to growth but it could be some time before people see the effects of this, an expert has warned.

GDP for the first quarter of this year with the economy moving out of recession.

But Adrian Wright, director of the Institute for Research into Work, Organisations and Employment at the University of Central Lancashire, said people should remain cautious with their spending.

He told : “The rise in GDP may be a consequence of easing pressure on consumers and wages outstripping inflation. While it’s a good sign, whether people feel better off is a separate issue.

“Falling inflation and rising wages will go some way towards repairing the economy, but we are still seeing sectors like house building on the decline.”

He added: “Many people are continuing to be cost-sensitive. With mortgage rates still on the rise, people are keen to reduce their household bills as much as possible.

“Shopping around and taking time to research the best deals for household finances is a good way to help ease the economic pinch.”

He warned it could be some time before people reap the benefits of the economic growth. Mr Wright said: ‌”Any economic growth is a good sign.

“However, the interest rates are still continuing to impact mortgage and inflation rates, so it could be a while before consumers feel the benefits of this growth.

‌”Factors such as employment figures are likely to provide a more detailed indicator of cuts in interest rates than GDP figures. The Bank of England have suggested they might cut rates, but numerous factors have to be taken into account for this decision to be carried out.”

Rob Morgan, chief investment analyst at Charles Stanley, also gave a cautious view of the state of the economy.

He said: “The economy has returned to growth after a shallow technical recession but is still lacklustre.

“Zooming out to the bigger picture, it is likely to continue to tread a steady but underwhelming path.”

But he said there are signs the economy could continue to grow. Mr Morgan said: “Confidence among both businesses and consumers has grown.

“Having battled the impact of stubborn inflation and high interest rates, many households are now starting to reap the benefits of inflation falling more rapidly than wage growth.

“Recent cuts to National Insurance and the planned increase in the National Living Wage also stand to offset the headwind of restrictive higher interest rates. This boost to spending power bodes well for some further modest growth in the coming months.”

Families also face extra pressures on their budgets as many household bills went up last month, including , water bills, and mobile and broadband.

Adeel Tufail, senior lecturer at The University of Law Business School, pointed to a variety of challenges that the economy faces in the month’s ahead.

He said: “Inflation is a concern due to different factors including supply chain disruptions, rising energy prices, and increased demand post-pandemic.

“High inflation can limit purchasing power and affect consumer confidence. The UK faced challenges related to labour shortages in a few sectors, including hospitality, transportation, and healthcare.

Brexit, pandemic-related factors, and changes in immigration policies contributed to these shortages.”

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