The British economy faces difficulties in the last quarter of 2023 after the Bank of England paused its most restrictive monetary policy in three decades. Experts do not believe that fiscal support from the government will sustain the economy during this delicate period.
"The economy is entering more troubled waters, and a (relatively mild and short-lived) recession is likely to ensue this winter," declared Sandra Horsfield, an economist at the multinational Investec, who was quoted by Bloomberg.
Although the debt data released on September 21 shows that the Treasury deficit for the current fiscal year remains below forecasts, the share of public debt in the economy is at its highest level since the early 1960s, according to the media.
Chancellor of the Exchequer Jeremy Hunt "poured cold water" on the prospect of tax cuts demanded by members of the ruling Conservative Party before the election, commenting that such measures are "virtually impossible" due to the difficult economic and fiscal context, highlighted the media.
Furthermore, interest rates remain high – the effect of 14 consecutive increases – and any economic downturn would threaten tax revenues.
Although retail sales data showed an increase of 0.4% in August 2023, this growth "is not as good as it seems and consumer spending is expected to decline in the coming quarters," said Alex Kerr of the consulting firm Capital Economics.
On the other hand, the value of retail sales in August was 17% higher than pre-pandemic levels in February 2020, while the volume of those sales was 1.5% lower, making people pay more to buy fewer goods.
The general economic situation is aggravated by the situation of the country's real estate market. Data from mortgage lenders indicates that the UK is halfway to the 10% decline that most economists predict.
This could add to "the cold winds battering the British economy," making property owners feel less wealthy and forcing those without homes and those trying to buy one to save more, Bloomberg predicted.
The United Kingdom has been one of the countries most affected by the effects of the Covid-19 pandemic and the energy crisis resulting from Western sanctions imposed on Russia for its special military operation in Ukraine. Additionally, the cost-of-living crisis in the country continues to gain momentum, as staple foods are now up to 80% more expensive than in 2022, according to consumer watchdogs.