The UK's Economic Outlook Is Riding on Election Politics

The UK economy’s mixed report card for 2023 amplifies this year’s tension between what election politics is likely to deliver and what the economy needs to break out of a low-level growth/productivity equilibrium.

Compared with a year ago, the UK has put behind it the horrible risk of a big financial crisis that would have demolished its pension system and crippled the mortgage system. The country has more than halved its inflation rate from 10% last January to 3.9% and has finally seen real wages grow. With the weekend’s two-percentage-point cut in the main national insurance rate to 10%, benefiting 27 million people, the average family will realize £450 ($572) in annual savings. Meanwhile, mortgage rates and other borrowing costs have been coming down as markets expect the Bank of England to embark soon on a rate-cutting cycle.