UK growth to be subdued

Based on forecasts from the EY Item Club, this reflects an improvement on the 0.7% decline expected in its January forecast. Output is then expected to rise by 1.9% in 2024 and 2.3% the year after that.  

In the first half of this year the economy is expected to flatline, returning to growth in the second half of the year as inflation and household bills sharply fall. The sharp decline in inflation is primarily because prices this year are compared with the high prices in 2022, while household bills are set to drop from July as households benefit from the decrease in natural gas prices over the winter.

Overall, the group expects inflation to fall close to the Bank of England’s two percent target, dropping just below three percent by the end of this year – and is around a percentage point lower than what the group predicted in January.

EY Item Club did stick to its prediction that house prices would fall by 10%, while it expects the Bank of England to raise interest rates next month by 0.25% to 4.5% before cutting rates by the end of the year.