UK Finance Summary | Monthly Economic Review October 2024
With the new UK government’s first Budget set for 30th October, UK Finance has explored
the public finances they inherited and potential policy directions. The latest figures reveal
borrowing is higher than expected, driven by increased spending on public services and
benefits. This year’s borrowing is the third highest since 1983, and significant overspending
in some departments points to difficult tax and borrowing decisions ahead. The Office for
Budget Responsibility (OBR) warns public spending is at its highest level since the 1970s,
with tax increases anticipated.
Rumours suggest fiscal rule changes could allow more flexibility, especially for capital
spending. Consumer sentiment has weakened, with delays in business orders as firms await
clarity on government priorities. However, the OBR may provide some optimism by
upgrading its 2023 growth forecast to 1.1%, supported by falling inflation and improving
interest rate outlooks.
OECD Outlook
A Turn in Global Growth The OECD’s autumn report, “Turning a Corner” offers positive
signs for the global economy, with resilient growth and moderating inflation. Global GDP is
projected to rise by 3.2% in 2023, with UK growth revised up to 1.1%. However, challenges
persist in Germany and Japan, and global trade has softened. Geopolitical tensions and trade
risks remain concerns for investment and financial stability.
Monetary Policy
Rate Cuts in Motion Central banks are initiating interest rate cuts. The ECB has reduced rates
twice, the US Federal Reserve surprised markets with a 50-basis-point cut, and the Bank of
England maintained rates at 5%, with expectations for a further cut in November. Inflation is
falling, and labour markets are easing, but global uncertainties linger.
China’s Economic Slowdown China’s economy faces ongoing challenges, with weak
domestic demand, rising unemployment, and property sector woes. The People’s Bank of
China has introduced stimulus measures, including interest rate cuts, but achieving growth
targets remains uncertain.
Key Indicators
GDP Q2 2024: 0.6%
CPI Inflation (Aug 2024): 2.2%
Unemployment Rate (Jul 2024): 4.1%
Bank Rate (Sep 2024): 5.0%
Conclusion
As the UK heads into its first Budget under Labour, there is considerable pressure to address
public borrowing while managing economic growth. Global economic forecasts provide
some optimism, but the need for fiscal discipline and monetary adjustments remains. The
government and upcoming policy decisions will be crucial in shaping both the short and long-
term economic trajectory.
Also Read – A Guide on Corporate Taxes in the UK
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