Now that we’re well underway with 2018, we thought it was high time for us to make a few educated predictions about our economic future here in the UK. Just for fun, we’ll take a look at how our 2017 predictions panned out, before outlining the economic changes for 2018 that we think might unfold this year.
Acumen’s 2017 UK economy forecast
So, how did our 2017 UK economy forecast pan out? Well, we don’t like to blow our own trumpets but we’re pleased (and a little relieved!) that all of our predictions came true. Having said that, it’s very much a muted celebration because, by the very nature of these forecasts, the year that was turned out to be rather a painful one for the British public and economy alike.
This is what we predicted at the turn of 2017:
✓ Slowed UK economic growth – Despite a strong global economy, the UK was hamstrung by a Brexit referendum hangover. This devalued the pound, leading to widespread uncertainty and a subsequent slow-down of growth.
✓ Rise in inflation – Once again, our prediction of an inflation rate hike proved to be right on the money. Bank of England Governor, Mark Carney, oversaw the first interest rate rise in a decade, with inflation rates maxing out at a high of 3.1%.
✓ Weaker salaries – As an inevitable outcome of the inflation rate increases, many workers across the country felt the pinch with what The Guardian gloomily dubbed ‘the biggest squeeze on wages since the end of the Napoleonic Wars’.
✓ Reduced consumer spending – As a knock-on result of the nation having to tighten collective belts, 2017 saw the biggest slump in consumer spending since 2012. According to Visa, annual consumer spending fell by 0.3% last year – the first annual decline in half a decade.
✓ Reduced business investments – Mark Carney again warned that uncertainty over the UK’s relationship with the EU would reduce business investment. He was right. As figures from the Office for National Statistics (ONS) confirmed stagnation in the year since the referendum.
Acumen’s economic changes for 2018
So, what are Acumen’s 2018 economic predictions? Without further ado, let’s get into it!
Bitcoin bubble burst
Something we have all heard regularly over the past months is the term ‘Bitcoin’. Crypto currency is increasingly being seen as an investment opportunity. However, is it all too good to be true? Although we expect that crypto currency could shape how we move money in the future, we believe the current speculative bubble will burst. Central banks in China and South Korea are already restricting trading in Bitcoin and it wouldn’t be a surprise to see this stance copied in other regions. This, coupled with the increasing complexity and computer processing power required to support the block chain that sits behind crypto currency, will make trading increasingly challenging as it becomes more popular. So, whilst we think Crypto is here to stay, we don’t think the crazy returns we have seen over the past few years are likely to continue.
Nearing the end of the financial boom?
Since the last recession hit, as a country, we have gradually recovered economically and markets have continued to thrive. However, is one of the longest ‘bull’ markets in history nearing its end? A regular occurrence in the world of finance is the peaks and troughs of the economy. We are moving into an interesting period and with central banks starting to remove the support they have provided since the financial crisis. Will the global economy be able to stand on its own and increase its upwards momentum? Our prediction is that 2018 will be a more volatile year in investment markets than 2017 but we are going to make a judgement call and say we still think it will be a positive one.
Gradual interest rate rise
Another of the economic chances for 2018 that we predict is that we expect to see a gradual interest rate rise. After the Bank of England raised its base rate from 0.25% to 0.5% in November of last year, we expect that there is a strong possibility that this could continue to crawl up even further. This is likely to be in a gradual manner as the Bank of England will not want to increase too quickly and dampen economic growth particularly in light of the uncertainty around Brexit.
Inflation will fall from current levels
The rate of inflation fell to 3% in December from the previous 3.1% in November, which was a six year high for the UK. The rise was an effect of the falling value of the pound because of Brexit. Another of our UK economy forecasts is that we expect the rate of inflation to dip slightly as the effect of the falling pound washes out of the system.
More Brexit uncertainty
Is Brexit still giving you a headache, with nothing set in stone and financial uncertainty still looming? With the leave date only set for March 2019, our UK economy forecast is likely to see more confusion caused by Brexit. If you need advice with your current economic standing in the midst of Brexit and the confusion it is causing, talk to one of our expert financial advisers for help and guidance on your future financial plans.
For more information, or to talk to one of our expert financial advisers, call Acumen today on 0151 520 4353 or email us at [email protected].