United Kingdom Economic Forecast

UK Economic Forecast

December 23, 2021

After GDP growth lost steam in Q3, momentum has seemingly eased further in Q4. Economic growth ebbed notably month-on-month in October on a slowing services sector and a downturn in construction. More recently, the rise of Omicron has led to new restrictions on domestic activity and visitor arrivals, and is causing consumers to become more cautious. In addition, surging price pressures are likely hurting purchasing power somewhat. As a result, the composite PMI plummeted in December, largely due to a sharp slowdown in the customer-facing services sector. In politics, the incumbent Conservative Party suffered a large loss in a December by-election for a historically safe Conservative seat. The result puts Boris Johnson’s future as prime minister in some doubt, and is a reflection of public dissatisfaction with the government over its handling of the pandemic and corruption allegations.

United Kingdom Economic Growth

Growth will slow next year relative to 2021, although extra spending announced in the budget should provide some support. A potential prolongation of supply disruptions and further Omicron-related restrictions pose downside risks. Doubts over Johnson’s continuity as PM and tense relations with the EU—in particular over the Northern Ireland protocol—further cloud the outlook. FocusEconomics panelists expect the economy to expand 4.8% in 2022, which is down 0.2 percentage points from last month’s forecast, and 2.2% in 2023.

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United Kingdom Facts

Value Change Date
Bond Yield0.83-3.04 %Jan 01
Exchange Rate1.33-0.35 %Jan 01

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