Economic, lending and housing update
The UK economy would appear to be in a tough spot. Sharp rises in central bank policy rates have put huge pressure on important parts of the economy in the fight against inflation.
Barclays have recently released an economic, lending and housing update where they invited Chief Investment Officer, Will Hobbs, to share his thoughts on the current economic outlook. Here’s what he had to say:
There is never a shortage of doom mongers when it comes to the outlook for the UK economy. The moment we are in is no different. After a prolonged period of very slow growth, commentators seem determined to see, at best, more of the same.
However, we need to remember that for most of modern economic history, the UK and global economy has been better off seen as innocent until proven guilty. More often than not, growth is the norm not the exception. That is generally because, most of the time, new technology is constantly being assimilated into the economy, helping to improve the productivity of our workforce.
That is not to suggest that the moment we are in is without danger or challenge. The battle to contain inflation has seen central bankers raise policy rates sharply and painfully for many households. Inflationary pressures do seem to be unevenly ebbing around the world, the UK included. However, oil prices remain a wild card, capable of reinserting some inflationary heat if the supply situation worsens from here.
In spite of this, there are a few reasons for cautious optimism. The household excess savings arsenal, accrued during the pandemic thanks to restricted spending opportunities in services and government support, has dwindled but not disappeared. There is potentially a helpful match-up between which households have these savings, and those still to digest a big uptick in mortgage costs.
Furthermore, the ebbing of inflationary pressure combined with the still strong employment backdrop means that wage growth is now moving into positive inflation adjusted territory on a year on year basis. That is a significant and underplayed positive when it comes to the outlook for the UK.
Finally, much of the slow growth of the last few decades can be chalked up to an absence of the kind of technological change that generally spurs productivity growth. There are of course other factors to consider in this, but that period may well be over with the arrival of large language models.
Will Hobbs, Chief Investment Officer, Barclays
Click here to view the report in full.
For more information about the current lending market, get in touch with our mortgage advisor Becky Hughes on 02921 672480 or email: becky.hughes@grosvenormay.co.uk.
