United Kingdom Economic Forecast

UK Economic Forecast

May 31, 2022

GDP growth was well above the European average in Q1, as the removal of virtually all Covid-19 restrictions supported private consumption. Moreover, fixed investment accelerated from Q4 due to a large expansion in government investment. However, business investment contracted, while exports fell sharply. Moreover, growth only occurred early in the quarter, as monthly data shows GDP flatlined in February and shrank in March, as the cost-of-living squeeze intensified. Moving to Q2, PMI data for April and May suggests a sharp loss of momentum, in line with record inflation, all-time low consumer sentiment and renewed supply chain difficulties. In May, the government announced a GBP 15 billion cost-of-living package, with measures including a discount on energy bills for all households, and fiscal transfers to low earners. The measures will support activity, but potentially at the cost of generating extra inflation.

United Kingdom Economic Growth

This year, growth will slow sharply due to intense inflation and tighter monetary policy. Protracted conflict in Ukraine and new Covid-19 variants pose downside risks, while further fiscal support is an upside risk. Trade tensions with the EU have risen recently after the government announced plans to override the Northern Ireland Protocol, further clouding the outlook. FocusEconomics panelists expect the economy to expand 3.7% in 2022, which is down 0.1 percentage points from last month’s forecast, and 1.5% 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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