UK Economic Growth


uk economy growthAfter six months of gloomy economic news, political uncertainty and market volatility, it is great to end the year on good news. Continued business growth shows that the pace of UK economic growth remains resilient right now, despite uncertainty caused by Brexit. And there are signs Europe is getting better too.

The UK Economy

The UK economy is heading for a strong end to the year, beating economists’ forecasts. The closely watched survey of the dominant services sector companies, that showed such a sharp downturn following the Brexit vote – has reported the fastest growth since January.

The survey that covers banking to hotels, shows businesses enjoyed a continued recovery and are intending to increase hiring over the next quarter. The survey’s publishers predict GDP growth this quarter will match the same level of growth in the third quarter, and is supported by its polls of the smaller construction and manufacturing sectors last week.

The Markit/CIPS UK services PMI report is consistent with other indicators, like the British Retail Consortium. Retailers report like-for-like retail sales were up in November on a year ago, and not just from a busy Black Friday.

Barclaycards data, shows consumers spending is rising again. Consumer spending grew 5.1% in November, the second highest year-on-year increase since it started publishing data five years ago. That’s on top of record growth of 5.5% in October.

Although Barclaycard says we’re having more cinema trips and meals out, some of the increase is because we are paying more for our essentials in November. For example, spending on petrol is up almost 12% on this time last year, when a litre of unleaded petrol cost 108p, compared with 116p today. And with stronger wholesale oil prices due to falls in production, that trend is likely to continue.

This highlights the concerns for inflation growth as the weak pound raises the cost of imports. Although the pound has recovered recently, it is still worth nearly 13% less than it was before the vote. You can read more about what inflation means for you and your money by clicking here.

In the near term, the weak pound is helping overseas sales for companies, stimulating growth. The Markit/CIPS UK services PMI has now been above the 50-mark predicting growth for four months.

The European Economy

The economy in Europe is having a good end to the year too. As nearly half of our trade is with these markets, and the weak pound against the dollar gives UK companies a competitive advantage, this could be the best news of all.

European employment is rising at the fastest rates seen over the past five years, showing there is an appetite to hire. Much of the UK’s slow growth over the last 4 years can be attributed to slow Eurozone growth, so it is positive to see Eurozone growth is predicted to be not far off the UKs.

Spain’s services PMI hit a five-month high, Ireland’s rose to its highest level since August and Italy’s rising to a three-month high despite their own local difficulty that you can read about by clicking here.

German growth slowed slightly, but it is still putting in a strong performance. France is the fly in the ointment, sliding to a four-month low with a barely any growth.

What it means for you

It’s great to see that consumer spending has remained stable since the summer, however, we have seen steep rises in costs to businesses that we haven’t seen for over five and a half years. If inflation grows faster than forecast, we may see interest rate rises sooner.

That means firstly, making sure your savings are in the best place possible to prevent erosion by inflation. Savings are eroded by inflation when the rate of interest your nest egg receives is lower than the inflation rate. It means that your savings value is growing slower compared to what they could buy a year ago.

To protect your savings, they should be in a savings account that provides the best interest rate you can access and you should regularly check to make sure it still is. You can do this using our savings account checker by clicking here.

Secondly, it means reviewing your mortgage to make sure you are on the lowest rate you can access. Remortgaging now gives you the option to either lock in the price you are paying now, or reduce your payments. Remortgaging your home can save hundreds – possibly thousands – of pounds each year, if you find a better interest rate.

Bear in mind that if you only have a small outstanding mortgage the amount you stand to save may be too low to make switching worthwhile. Plus, you could face switching and redemption costs, so it is important to check this before making a switch. We have more information on remortgaging you can see by clicking here.

If you would like to get to grips with your savings, or explore whether you could be getting a better mortgage deal, our advisers can help you. Even if you don’t need to make any immediate changes, contact us today for an initial consultation.

 

Your home may be at risk if you do not keep up with the repayments for a loan or mortgage secured on your property.

The value of investments can go down as well as up and you may not get back the amount invested.

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