UK economy gets triple confidence boost as it’s ‘turning a corner’ | UK | News

The UK economy was boosted by a triple helping of good news on Monday as financial experts said it was “turning a corner”. First, the finance chiefs at some of Britain’s biggest companies reported confidence soaring at the fastest rate since the Covid vaccine rollout at the end of 2020.

Then a survey of economists revealed the majority believe inflation is falling fast and they do not expect the Bank of England to raise interest rates further.

Third, respected economic forecaster the EY Item Club predicted the UK economy will grow 0.2 percent this year, in the face of gloomy official forecasts to the contrary.

The mood of optimism was clearly visible in the FTSE 100 index of top UK companies which soared to its seventh consecutive day of gains on Monday.

The move came after a survey by top City consultants Deloitte found confidence levels among business leaders rocketing.

The report stated: “Sentiment among finance leaders of the UK’s largest firms has improved significantly since the start of the year.

“A net 25 percent of Chief Financial Officers are more optimistic about the financial prospects of their business than they were three months ago.”

Ian Stewart, chief economist at Deloitte, said: “The economic unpredictability that marked the beginning of 2023 has started to clear.

“Business confidence has rebounded, helped by a decrease in energy prices, an easing of Brexit concerns and an improving inflation backdrop.

“Crucially… March’s events in the global banking system have not affected the pricing and availability of credit for UK corporates.”

Meanwhile, more than half of economists surveyed by Bloomberg now think the Bank of England will not raise the bank rate further.

Figures this week are expected to show inflation dipping below 10 percent for the first time since August and a cooling of the labour shortage in the UK.

Governor Andrew Bailey and his colleagues will be watching the data carefully for signs of a turning point as they consider their next interest rate decision in May.

Robert Wood, chief UK economist at Bank of America said: “Certainly that’s good news for the Bank of England, and it does make the May decision a really close call.

“It’s pretty clear that labour market tightness is fading.”

Simon French, chief economist at investment bank Panmure Gordon, said he believed inflation was falling, but was less certain about the Bank’s intentions.

He said: “Inflation has pretty clearly peaked. If you look at natural gas prices, shipping prices, all the raw commodities that have driven inflation up to north of 11 percent, then they’re all coming down pretty fast.

“It won’t be a straight line. But will inflation fall to mid-to-low single digits? Yes, that’s pretty compelling.

“The bit that I’m not sure about is whether that means the Bank of England is done with raising interest rates.

“There are other elements going on. Not just commodity prices, wages, services prices, where the bank is a bit more exercised about inflation being embedded.”

He added that food inflation still in double digits was a “social concern” that almost everybody felt keenly and hit the poorest families hardest.

The third batch of good news came as The EY Item Club Spring report stated: “The UK economy is now expected to avoid both a technical recession and a calendar year contraction in 2023.

“The economy is expected to record 0.2 percent growth this year, which is a significant upgrade from the -0.7 percent contraction predicted in January’s Winter Forecast.

“The improved outlook is largely thanks to better-than-expected GDP in the fourth quarter of 2022 and the rapid easing of inflationary pressures.”

EY’s UK chair Hywel Ball added: “The UK economy seems to be turning a corner.

“Economic performance has been resilient, despite challenges in the latter half of 2022.

“While easing, the economy’s challenges haven’t gone away overnight: inflation is still in double-digits and energy prices remain historically high.

“However, perceptions matter and the fact the economy has been able to outperform expectations could help stir a revival in business and consumer confidence.

“Falling energy prices and inflation, an end to rises in borrowing costs, and growing confidence, mean the economy has a chance to shed some of the gloom it has accumulated recently.”