Rutherford Cross recently held a roundtable lunch for Senior Finance leaders in the Scottish business community. We were delighted to have Iain Duff join us from the Bank of England who gave us a detailed economic update, as well as a general outlook on the economy over the coming months. Hazel Wynn provides a summary of the discussion and the UK economic outlook below.
Summary of Iain’s Presentation:
- UK-weighted global GDP growth has averaged around 2%. It is expected to remain steady but below its pre-pandemic average. So far this year, Germany has been close to recession and the EU economy has not been performing particularly well. The US has been performing better, but the Chinese economy has been weaker (although still outperforming the rest of the world and forecast to hit almost 5% growth this year when the global average is under 3%), having been lower than implied by business surveys in 2023, but it has recovered in the first part of 2024.
- As we know, the UK economy grew at 0.7% in Q1 of this year and then 0.5% in Q2. Business investment in the UK has been weak as of late, with exports down year on year and we are also importing less.
- Real income growth has picked up as inflation has slowed, at 3.4% this year in the UK, and whilst consumer confidence has been weak, this is expected to continue to improve.
- The job market has slowed somewhat this year. Tightness in the UK labour market continues to ease, although at a slower rate than in 2023. Pay growth has been at an average of around 5% and is forecasted to be at 3% next year. Unemployment has been as low as 3.5% in the past 18 months, but the forecast is that it will rise to 4-5% in 2027.
- The Living Wage increase in April 2024 has caused some challenges for businesses, although this increase only directly affected 5% of the UK workforce. Consumer price inflation peaked at around 11% in October 2022 and is now at 2.3%. The target is to keep CPI inflation at 2%.
- Pre-lockdown, UK GDP growth averaged around 2%; currently, it is fairly flat below 1%. Interest rates are currently at 4.75%, and the Bank of England has used higher interest rates to reduce inflation. There have now been 2x 0.25% interest rate cuts in 2024.
The overall message from Iain’s presentation was to remain cautiously optimistic into 2025 and beyond; with the likelihood of interest rates coming down slowly, inflation settling close to 2%, but with unemployment likely to rise over the coming months (albeit from an unusually low level).
After Iain’s presentation, the group asked questions about the impact of the employers’ NI increase and its potential impact on salary growth, as well as how AI is currently impacting businesses and jobs in the future. The sentiment on this was that AI could enhance productivity and should not necessarily be viewed as having a negative impact on job creation.
If you would like to discuss the current Senior Finance job market and how the economy is impacting hiring in Scotland, please get in touch with Hazel Wynn at [email protected].
