Economics bulletin 14 October

Government borrowing costs reaches 20 year high

UK Government borrowing costs have reached a 20-year high, following confirmation that the Bank of England intends to end its temporary bond purchasing program on 14th October.

The Government has brought forward it’s announcement of the Medium Term Fiscal Plan to 31st October. This will be accompanied by the Economic and fiscal outlook report from the Office of Budget Responsibility.

Analysts have suggested that the Government will have to cut spending or raise taxes by £62bn in order to stabilise or reduce the UK’s national debt.

Rising risk of a recession

UK economic activity fell by 0.3% in August, further raising concerns of a recession. The UK’s economic output has now fallen below its pre-COVID level.

The International Monetory Fund (IMF) has downgraded the UK’s 2023 growth forecast by 0.2 percentage points to 0.3%. It warned that “for many people 2023 will feel like a recession” as the global economic outlook worsens.

Real wages continue to fall

Average total pay (including bonuses) continued to rise, up 6% in the 12 months to June to August 2022 according to the ONS. Inflation continues to outpace wage growth, resulting in a decline in the value of pay with workers 6.1% worse off than a year ago. Real wages have now been falling for the past 10 months.

Economic inactivity continues to rise

The number of people who are economically inactive due to long term sickness has reached a record high of 2.5m.

Demand for labour remains high, the unemployment rate has fallen to 3.5% in the three months to August. This is the lowest level since February 1974.

Avian flu

Regional housing measures have come into force in Norfolk, Suffolk and parts of Essex from 12th October to halt an outbreak of avian influenza.

The Government has confirmed that the UK has faced its largest ever outbreak of avian influenza with over 170 cases across the UK since October 2021.