How do you think the UK economy will perform over the next 5 years ?

[vand]

It is certainly worth mentioning the official 0.5% contraction we had in July:
https://www.reuters.com/world/uk/uk-eco ... 023-09-13/

Frankly, I am not surprised. I do expect the next 12-18 months to be difficult as the full effect of the interest rate hiking cycle fully feeds through into the wider economy. IMO there a 2-3 year lag with this sort of "1/4 point hike" policy, so we may still be feeling the tightening effects as far down the road as 2026 (of course, if that is so, we'll have begun the easing cycle well before then..)

But that said, my central thesis remains - despite inevitable cyclical downswings, the continual process of capitalism drives to towards things getting better over the long term.

[vand]

And, it is also worth factoring in the effect of the flailing housing market now, as that is by a large a good sentiment indicator of how willing people are to spend money.

Many people will be shocked that their house is worth less than this time last year, or 2 years ago, or even 3 years ago... once that feeds into the public pysche it's going to dampen our animal spirits further.

[1nvest]

And, it is also worth factoring in the effect of the flailing housing market now, as that is by a large a good sentiment indicator of how willing people are to spend money.

Many people will be shocked that their house is worth less than this time last year, or 2 years ago, or even 3 years ago... once that feeds into the public pysche it's going to dampen our animal spirits further.

I see it more as a return to 'normal' times. Low/zero interest rates that have become the 'norm' since the 2008/9 financial crisis, free money, is more the exception than the rule. Which has induced high prices (stocks/bonds/houses). A return to 4% or 5% interest rates, inducing lower stock/bond/house prices is more a case of giving back some of 'gains'. £300K average house price, £30K average wage, 10x multiple, under near 0% interest rates perhaps seeing wages increase 10% to 33K, multiple reducing to 5x, average house prices £165K. Where it costs to borrow, but where housing is more affordable.

For those that bought into housing 15+ years ago the rise and fall isn't really a loss, upsizing where you get less, but pay less. Even those that bought in at the highs aren't losers as they also get less, pay less to upsize. The losers are those that are selling to liquidate, such as having to sell at half former prices to pay for even higher/rising care/nursing home costs. Heirs lose out in receiving a lower residual than otherwise might have been the case. Yet another case of the younger generation paying the price.

Some of today' youth complain about the likes of the triple-lock pension but so doing in effect cuts off their own nose ... as one day they'll be pensioners and if the state pension is low, as it is in the UK compared to many other countries, then so today's workers will retire less well off. That is another area in which the youth of today will lose out IMO.

A main factor IMO is the lack of youth interest in politics, they allow their prospects and freedoms to be eroded without complaint. Just look at their privacy rights, where we've transitioned to where the state now captures/records each and everyones movements, activities, preferences and financial transactions via street cams, geolocation, internet activities and CONNECT where banks report all transactions to the state. Where mass murders such as exportation of Covid into care homes, 100K+ avoidable deaths ... are just ignored.

[vand]

And, it is also worth factoring in the effect of the flailing housing market now, as that is by a large a good sentiment indicator of how willing people are to spend money.

Many people will be shocked that their house is worth less than this time last year, or 2 years ago, or even 3 years ago... once that feeds into the public pysche it's going to dampen our animal spirits further.

I see it more as a return to 'normal' times. Low/zero interest rates that have become the 'norm' since the 2008/9 financial crisis, free money, is more the exception than the rule. Which has induced high prices (stocks/bonds/houses). A return to 4% or 5% interest rates, inducing lower stock/bond/house prices is more a case of giving back some of 'gains'. £300K average house price, £30K average wage, 10x multiple, under near 0% interest rates perhaps seeing wages increase 10% to 33K, multiple reducing to 5x, average house prices £165K. Where it costs to borrow, but where housing is more affordable.

For those that bought into housing 15+ years ago the rise and fall isn't really a loss, upsizing where you get less, but pay less. Even those that bought in at the highs aren't losers as they also get less, pay less to upsize. The losers are those that are selling to liquidate, such as having to sell at half former prices to pay for even higher/rising care/nursing home costs. Heirs lose out in receiving a lower residual than otherwise might have been the case. Yet another case of the younger generation paying the price.

Some of today' youth complain about the likes of the triple-lock pension but so doing in effect cuts off their own nose ... as one day they'll be pensioners and if the state pension is low, as it is in the UK compared to many other countries, then so today's workers will retire less well off. That is another area in which the youth of today will lose out IMO.

A main factor IMO is the lack of youth interest in politics, they allow their prospects and freedoms to be eroded without complaint. Just look at their privacy rights, where we've transitioned to where the state now captures/records each and everyones movements, activities, preferences and financial transactions via street cams, geolocation, internet activities and CONNECT where banks report all transactions to the state. Where mass murders such as exportation of Covid into care homes, 100K+ avoidable deaths ... are just ignored.

I do agree that housing will flounder and get cheaper, but we ain't going to see a 45% nominal correction in housing market.. it just won't happen. I think more likely a 15% correction (max), but with inflation that will be a 35% drop in real terms.

[1nvest]

I see it more as a return to 'normal' times. Low/zero interest rates that have become the 'norm' since the 2008/9 financial crisis, free money, is more the exception than the rule. Which has induced high prices (stocks/bonds/houses). A return to 4% or 5% interest rates, inducing lower stock/bond/house prices is more a case of giving back some of 'gains'. £300K average house price, £30K average wage, 10x multiple, under near 0% interest rates perhaps seeing wages increase 10% to 33K, multiple reducing to 5x, average house prices £165K. Where it costs to borrow, but where housing is more affordable.

For those that bought into housing 15+ years ago the rise and fall isn't really a loss, upsizing where you get less, but pay less. Even those that bought in at the highs aren't losers as they also get less, pay less to upsize. The losers are those that are selling to liquidate, such as having to sell at half former prices to pay for even higher/rising care/nursing home costs. Heirs lose out in receiving a lower residual than otherwise might have been the case. Yet another case of the younger generation paying the price.

Some of today' youth complain about the likes of the triple-lock pension but so doing in effect cuts off their own nose ... as one day they'll be pensioners and if the state pension is low, as it is in the UK compared to many other countries, then so today's workers will retire less well off. That is another area in which the youth of today will lose out IMO.

A main factor IMO is the lack of youth interest in politics, they allow their prospects and freedoms to be eroded without complaint. Just look at their privacy rights, where we've transitioned to where the state now captures/records each and everyones movements, activities, preferences and financial transactions via street cams, geolocation, internet activities and CONNECT where banks report all transactions to the state. Where mass murders such as exportation of Covid into care homes, 100K+ avoidable deaths ... are just ignored.

I do agree that housing will flounder and get cheaper, but we ain't going to see a 45% nominal correction in housing market.. it just won't happen. I think more likely a 15% correction (max), but with inflation that will be a 35% drop in real terms.

I'm of the age where I jumped into the housing market as a first time buyer - coz if I didn't I'd never be able to afford, buy highers, where the price around halved within a few years, left in negative equity and high mortgage (double digit interest rate) payments. More broadly/nationally IIRC multi (3 or 4) year compounded nominals dropped 20% whilst inflation increased 25% to net a -33% decline over 1989 to early 1990's years.

I suspect you're right, perhaps driven by the continental Africa to Europe migration flow, the high numbers of recent turning out to have been just a initial trickle. May end up like the 1860 - 1910 years where average house prices declined, but average house/home sizes reduced at a faster rate. A transition to two families in the average/typical terraced house instead of one, each family paying a third of the current price for their half, two-thirds combined.

[vand]

I do agree that housing will flounder and get cheaper, but we ain't going to see a 45% nominal correction in housing market.. it just won't happen. I think more likely a 15% correction (max), but with inflation that will be a 35% drop in real terms.

I'm of the age where I jumped into the housing market as a first time buyer - coz if I didn't I'd never be able to afford, buy highers, where the price around halved within a few years, left in negative equity and high mortgage (double digit interest rate) payments. More broadly/nationally IIRC multi (3 or 4) year compounded nominals dropped 20% whilst inflation increased 25% to net a -33% decline over 1989 to early 1990's years.

I suspect you're right, perhaps driven by the continental Africa to Europe migration flow, the high numbers of recent turning out to have been just a initial trickle. May end up like the 1860 - 1910 years where average house prices declined, but average house/home sizes reduced at a faster rate. A transition to two families in the average/typical terraced house instead of one, each family paying a third of the current price for their half, two-thirds combined.

Yes, I have already done the maths on the 90s crash on other other thread.. prices nominally crashed in the first 2 years but then bumped along the bottom for another 4-5 years as inflation did the rest of the work.. 40% real fall from peak to trough over 6 years or so.... a repeat of that scenario is certainly possible.

Housing is currently in it's "nominal" drop phase - where the froth of the last few years is blown off. After that I expect to see a grinding phase where prices become more sustainable, but also homeowners are more reluctant to move as they have less equity and the fundamental haven't really caught up yet to allow a sustained increase. At that point though, and moving back on topic, I suspect it will of a headwind for the economy, and indeed more affordable housing is generally better for the economy.

Also by then I do think we will be more productive as a country. The trouble with ZIRP is the economic misallocation it causes - projects have a very low hurdle to clear in order to get greenlit. When funding rates are 5-7% however, that changes the game - your projects have to deliver 15% ROI or better in order to make them worth the risk. So, over the next few years we will see capital better deployed and come out healthier for it.

[sophia77]

Hey everyone,

Predicting the future of the UK economy over the next five years involves considering numerous variables. Factors like global economic conditions, domestic policies, and unforeseen events will shape outcomes. Expert analysis, government decisions, and market trends will provide valuable insights into the nation's economic trajectory.

[Mike4]

Hey everyone,

Predicting the future of the UK economy over the next five years involves considering numerous variables. Factors like global economic conditions, domestic policies, and unforeseen events will shape outcomes. Expert analysis, government decisions, and market trends will provide valuable insights into the nation's economic trajectory.

Hi Sophia77,

Welcome to the forum. Forgive me wondering but are you an AI? Your post seems awfully generic and, to paraphrase Basil Fawlty, states the bleeding obvious!

We have been getting a trickle of suspected AI posts on another forum I frequent they generally reveal themselves by failing to engage in a proper, meaningful conversation. Hence my question...

[CliffEdge]

I wonder if the NS&I website will work properly by five years time.

[Spet0789]

Some of today' youth complain about the likes of the triple-lock pension but so doing in effect cuts off their own nose ... as one day they'll be pensioners and if the state pension is low, as it is in the UK compared to many other countries, then so today's workers will retire less well off. That is another area in which the youth of today will lose out IMO.

A main factor IMO is the lack of youth interest in politics, they allow their prospects and freedoms to be eroded without complaint. Just look at their privacy rights, where we've transitioned to where the state now captures/records each and everyones movements, activities, preferences and financial transactions via street cams, geolocation, internet activities and CONNECT where banks report all transactions to the state. Where mass murders such as exportation of Covid into care homes, 100K+ avoidable deaths ... are just ignored.

This is an odd post… you seem very in favour of the state paying you lots of money and at the same time very suspicious of it.

Young people who oppose the triple lock so on the sensible basis that pensions mathematically cannot get more and more generous. It is an absolutely certainty to be means tested in future so young people know they need to make their own provision.

[1nvest]

This is an odd post… you seem very in favour of the state paying you lots of money and at the same time very suspicious of it.

Young people who oppose the triple lock so on the sensible basis that pensions mathematically cannot get more and more generous. It is an absolutely certainty to be means tested in future so young people know they need to make their own provision.

In a world of AI to come, there's a need to transition to sharing around the benefits from such. Should bring general prosperity, but yes is inclined to enrich a small number leaving others being means tested and struggling.

[U962]

A main factor IMO is the lack of youth interest in politics, they allow their prospects and freedoms to be eroded without complaint. Just look at their privacy rights, where we've transitioned to where the state now captures/records each and everyones movements, activities, preferences and financial transactions via street cams, geolocation, internet activities and CONNECT where banks report all transactions to the state. Where mass murders such as exportation of Covid into care homes, 100K+ avoidable deaths ... are just ignored.

Well in most case there is no point in being interested. The "state" will do what it wants and has enough power though violence and incarceration (at the moment!) to crush all dissent.
They can vote against their safe seat incumbent in parliament and it will be pointless.
Even if "their" candidate does get in, their candidate will invariably do exactly what the party leadership tell them to do: so again pointless.
When we were in the EU it was even worse as things were decided in Europe and the UK parliament had to change our laws to comply - so again no point.
Indeed I've never voted once in any general or local election. I did vote in the AV and Brexit referendums as being the first time in my life that my vote actually counted.

[vand]

As I said, I think things generally improve over long timeframes.

That said, I am seeing evidence now that things will get markedly worse over the next year - business forecasts have been revised down across the board in the circles in which I operate. It's not difficult to understand why as the real incomes have been squeezed and now, even if they are technically rising with the latest fall in inflation, a lot of people will have less disposable income that ever as they face a mortgage rate cliff edge when their cheap mortgage deals expire.

IMO the most sensitive sectors of the economy are probably already in recession. We will see how the official numbers show over the next few months, but as someone who has his nose close to the ground for these sort of things, there is no doubt in my mind that effects of all the policies are still being fed through into the real economy.

[Nimrod103]

As I said, I think things generally improve over long timeframes.

I'm glad you are optimistic. Because I'm not.

https://www.telegraph.co.uk/news/2023/1 ... ebt-abyss/

By 2010, public sector debt amounted to 65 per cent of national income; today it is 100 per cent, partly swelled by the cost of the pandemic, although the trend was clear in any case. According to the Office for Budget Responsibility (OBR), if nothing changes, on the current spending trajectory, debt will amount to more than 300 per cent of GDP within 50 years.
To keep debt from rising above 100 per cent of GDP over the long term would require a permanent increase in taxes and/or a cut in annual spending of 4.4 per cent of GDP, said the OBR. Yet real-terms spending is scheduled to rise further in the next parliament, even if the Tories win, leave aside what Labour might do.

[vand]

As I said, I think things generally improve over long timeframes.

I'm glad you are optimistic. Because I'm not.

https://www.telegraph.co.uk/news/2023/1 ... ebt-abyss/

By 2010, public sector debt amounted to 65 per cent of national income; today it is 100 per cent, partly swelled by the cost of the pandemic, although the trend was clear in any case. According to the Office for Budget Responsibility (OBR), if nothing changes, on the current spending trajectory, debt will amount to more than 300 per cent of GDP within 50 years.
To keep debt from rising above 100 per cent of GDP over the long term would require a permanent increase in taxes and/or a cut in annual spending of 4.4 per cent of GDP, said the OBR. Yet real-terms spending is scheduled to rise further in the next parliament, even if the Tories win, leave aside what Labour might do.

Could well be argued that increased borrowing is a natural response to lower interest rates.

We have discussed Debt/GDP in considerable detail and I am no MMT peddler, but it has to be looked at in context of what everyone else is doing. The UK isn't an outlier here; everyone's debt/GDP has risen, and there are other economies more vulnerable that the UK.

These things don't matter until the markets decide that they do matter, at which point they'll make an example of the most egregious borrowe - everyone else will pretend to sort themselves out to applease the markets and then we'll move onto worry about something else for the next 15 or 20 years.

[1nvest]

Former cases of energy induced inflation and no lessons learnt. Has knock on effects right through the economy, could have been stemmed, but no - energy firms (exceptional) profits won the day. Another local chippie shutting down, oil and gas prices - no longer a viable business.

Bleak outlook when the already vast public sector that the private sector already cannot sustain is further expanded under Labour. Net migration has risen over a million within a couple of years, flight of hundreds of thousands millionaires, inbound dependents, and that's a higher taxes and less to go around slippery slope.

If the 1% that pay a third of the total tax take opt to move elsewhere, the remainder 99% have to pay 50% more in taxes just to fill that hole. Great for the countries that the 1% flight to, double up their 1% to 2% and the rest can pay half as much tax.

[MuddyBoots]

I discovered recently that Ireland is high up in the list of countries by GDP per head, second globally in this version, though I realise there's different ways to calculate relative wealth figures.

https:// en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

I was surprised by this and wanted to make a comparison with the UK. Ireland has also had decent growth figures recently (12% in 2022 and 5.5% projected in 2023). Their debt to GDP ratio is less than half ours at 47%.

I've heard about the Celtic Tiger thing, and also their low corporation tax rate of 12.5% making them a tax haven for companies wanting to relocate there. They've done all that from within the EU too, which presumably hasn't tried to reign in their tax haven policy.

So why did it all go wrong for Liz Truss when she tried something similar for us? I remember some talk about the UK using our Brexit freedom to try some radical tax schemes to attract business here, yet all I can see is the govt forging ahead with it's high-tax high-spend high-debt philosophy.

With an election coming up, is there any party with a more prudent policy than this?

[Oggy]

It's all about perception. If investors and the markets perceive the UK is going down the tubes, then regardless of any data and charts which would seem to indicate otherwise, then down the tubes it will go, and as we all know, you cannot buck the market. My personal perception is the UK is a busted flush. My perception being influenced by the huge unsustainable national debt, the lack of investment - unless bribed by HMG - the lack of quality jobs, the despair of many folk who simply struggle to make ends meet, and the utterly vapid BS excreted by almost anyone in authority.

[MuddyBoots]

It's all about perception. If investors and the markets perceive the UK is going down the tubes, then regardless of any data and charts which would seem to indicate otherwise, then down the tubes it will go, and as we all know, you cannot buck the market. My personal perception is the UK is a busted flush. My perception being influenced by the huge unsustainable national debt, the lack of investment - unless bribed by HMG - the lack of quality jobs, the despair of many folk who simply struggle to make ends meet, and the utterly vapid BS excreted by almost anyone in authority.

I get that the markets will shun anyone with too much debt (whether govts, companies and individuals), so they will want our govt to raise enough tax to service it. However they didn't punish us for getting into this much debt in the first place and becoming more like a crypto-socialist country with our high welfare dependency and bailouts.

Mind you, a lot of employers are still talking about skill shortages, there's a list of shortage occupations somewhere, so there must be some potential growth out there if we can fill the vacancies.

[XFool]

Welcome to the forum. Forgive me wondering but are you an AI? Your post seems awfully generic and, to paraphrase Basil Fawlty, states the bleeding obvious!

We have been getting a trickle of suspected AI posts on another forum I frequent they generally reveal themselves by failing to engage in a proper, meaningful conversation. Hence my question...

Funnily enough, I have noticed a user occasionally posting on TLF financial threads whose posts always have roughly the same format, is always ultra polite, always asks for financial advice. And that's it.

I was wondering...