UK is out of Recession!

Welcome to another edition of The Business Owners' Property News, my weekly newsletter dedicated to helping business owners and busy professionals get started in property investing.

In today's issue we look at some important news of last week - the UK Economy coming out of recession!

At the turn of the millennium (sounds really cool to have been around at the turn of a millennium - some don't even see the turn of a century!) I was a Corporate Tax Manager at Deloitte, so always like reading Deloitte's Chief Economist's weekly personal view point on the economy.

I've summarised today Ian Stewart's take on the UK's return to growth...with my own conclusions on why this is important for business owners and property investors.

Return to Growth

The UK economy returned to growth in the first three months of the year, having slipped into a technical recession in the second half of 2023.

GDP growth of 0.6% on the previous quarter represents the strongest expansion for two years and the joint fastest in the G7 alongside Canada.

While we shouldn’t place too much weight on one data release - GDP numbers are choppy and often heavily revised – first quarter growth was remarkably strong and the rebound was broad-based, which looks like a plausible recovery.

Services output increased for the first time since Q1 2023, with 11 out of 14 subsectors increasing, suggesting consumer activity was picking up as inflation fell.

Manufacturing, which has been a weak spot, also expanded, driven by car production.

These gains were only offset a little by a contraction in the construction sector.

GDP per head also rose, up 0.4%, after seven consecutive quarters without growth.

Rising activity in the housing market and higher levels of consumer and business confidence are consistent with a continued economic recovery.

Sustained period of weakness

First quarter growth was strong, but this comes after a sustained period of weakness.

The stagnation of the past few years means the total level of output in the UK is just 1.7% higher than it was on the eve of the pandemic, well below the 3.8% and 8.7% growth seen in the euro area and US respectively over the same period.

The International Picture

The UK recovery fits with a wider, international picture. The euro area returned to growth in first quarter after a weak 2023, while inflationary pressures continued to ease.

The US economy, which has bucked the trend of other western economies by growing strongly in 2023 continues to show good growth. Stronger activity overseas should help boost UK exports.

The Bank of England has raised its forecast for UK exports this year from a contraction of 0.25% in February to an increase of 2.0% in its latest forecasts.

Inflation

The path of UK growth heavily dependent on what happens to inflation and last week brought good news on this front too.

Following last Thursday’s rate setting meeting the Bank of England’s Monetary Policy Committee said it now expected underlying inflationary pressures to fade “slightly faster” than previously assumed and consequently

“It is likely that we will need to cut bank rates over the coming quarters?.?.?. possibly more so than currently priced into market rates.”

The Bank’s new forecasts predict both faster growth and lower inflation than previously expected.

For businesses and consumers that is a dream combination.

With inflation forecast to continue falling financial markets expect the Bank to cut UK interest rates by around 50bps, to 4.75%, by December.

We are on the mend!

The UK economy is on the mend.

Barring external shocks, we expect growth to continue through the rest of this year and next year at around trend, or normal levels. ?

Falling inflation, rising real incomes and growth in the US and Europe should help to maintain the recovery.

Conclusion

So there we have it - good positive news and despite small changes and the fact that the road to recovery after the pandemic has been slow - psychologically it's brilliant news!

One of the main fears of business owners wanting to invest in property is finding the confidence and the "right time" to start investing.

Business owners already worry about how to start, where to buy, how to fund, how to refurb, how to tenant and how to manage a property.

Being in a recession and being in an inflationary, no growth, high interest rate economy doesn't support the cause of property investing when there is the underlying fear and uncertainty about your existing business!

So hopefully, the recent news of the recovery will provide the confidence for business owners to get started and take advantage of the growth that we will experience in the future!

Do you have some of the fears mentioned above? Need some help in getting started? Get in touch on 0121 647 7090 or email [email protected] to arrange a call.