UK Economic Outlook - March 2016

How secure is the recovery?

  • 2.2%

    Real GDP growth

  • 2nd

    fastest growth rate in G7

  • 3%

    Consumer spending growth

  • 0.5%

    Inflation

Highlights

  • The UK recovery since mid-2009 has been relatively slow by historical standards, but still faster than most other G7 economies over this period.
  • UK GDP growth slowed a little in 2015, but consumer spending growth remains relatively strong, helped by lower oil prices. The global outlook remains mixed with a gradual pick-up in the US and the Eurozone, but a slowdown in China, continued recessions in Russia and Brazil, and increased volatility in financial markets.
  • In our main scenario we expect UK GDP growth to average just over 2% in 2016. Consumer spending will be the main driver of UK growth this year, helped by continued low energy and food prices.
  • Risks to growth are weighted to the downside in the short term due to international risks, particularly in relation to emerging markets, as well as uncertainties relating to the EU referendum. But there are also upside possibilities if the global environment improves and productivity growth rates accelerate in the UK.
  • London continues to lead the recovery with projected growth of around 3% in 2016 but all other UK regions should also register positive real growth of around 1.4-2.3% per annum this year.
  • Inflation will remain low this year, but could rise back towards its 2% target by the end of 2017, so the MPC may start to raise interest rates gradually during the course of 2017 and beyond. But this now seems likely to be a very slow process and rates could still be only around 2% in 2020.
  • The Budget is likely to confirm plans for further fiscal tightening to eliminate the budget deficit before the end of this decade. This will impose some drag on the UK economy, but the private services sector should be strong enough to offset this in terms of GDP and jobs growth.

 

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The UK economic recovery: Better balanced than you might think

  • Some commentators have expressed concerns about the balance of the UK economic recovery to date, but Andrew Sentance, our senior economic adviser, argues in this report that this is not backed up by the facts on growth since mid-2009.
  • These data instead show strong positive contributions to UK growth from business investment and exports since 2009.
  • In the early phases of the recovery up to late 2012, consumer spending growth was weaker due to a ‘perfect storm’ of VAT rises, higher good and energy prices and lending restrictions by banks. However, consumer spending growth has picked up since early 2013 as these headwinds have eased or, for commodity prices, gone into reverse.

For more details please download the article


UK economy could generate 3 million extra jobs by 2025, led by services

  • Employment in the UK could grow by around 3 million by 2025, with the total number of jobs reaching almost 37 million.
  • Education and health could add over 1 million jobs by 2025 and become the biggest of the services sectors.
  • Business services could create around 1.5 million more jobs by 2025 and will become the second biggest services sector, with distribution, hotels and restaurants in third place.
  • The number of jobs in manufacturing could fall by a further 600,000 to around 2 million by 2025 as new automated technologies continue to boost productivity and overseas competition remains fierce. But this should be far outweighed by the growth in private sector services jobs.

For more details, please download the article and explore our jobs data analysis using the interactive tool below.


Explore the data

Please select up to six sectors to view
Jobs by industry sector, view as: Number of jobs% share of all jobs
Projections
% share of all jobs
000s of jobs
Average annual growth rate (%)
    Please deselect a sector before chosing another
    Source: ONS Workforce Jobs Survey for 1978-2015, PwC projections for 2025

    Contact us

    Contacts
    John Hawksworth
    Chief UK Economist
    Tel: +44 (0)20 7213 1650
    Email
    Andrew Sentance
    Senior Economic Adviser
    Tel: +44 (0)20 7213 2068
    Email