UK Economic Outlook: Full report - July 2012

This is the July 2012 issue of our regular UK Economic Outlook report. In addition to our usual detailed assessment of UK economic trends and prospects, set within a global context, this issue includes special features relevant to the UK housing market and prospects for the UK relative to other G7 economies.

While many uncertainties remain, our main scenario is for real Gross Domestic Product (GDP) to be broadly flat in 2012 as a whole, but picking up later in the year with GDP growth rising to 1.7% in 2013.

As our new UK business climate map in Figure 1.1 below shows, this ‘cloudy but improving’ outlook is mirrored in most UK regions, though the sunshine may come through a bit sooner in London and the South East than in some other parts of the country. The growth figures in the map are averages for 2012 and 2013 to smooth out short-term variations, while the weather symbols also take account of recent employment trends in each region. The Eurozone average is also shown in the map for comparison.

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Source: ONS, Eurostat, PwC analysis
Note: Eurozone employment rate is from 2011, figures on employment levels from 2012 show falling employment

Consumer spending is expected to show a similar path to GDP, with very modest real growth of 0.1% in 2012 picking up to around 1.3% in 2013 as inflation falls back to around its 2% target rate next year, so easing the squeeze on real household incomes.

Business investment should pick up over the next year, although this process will continue to be held back by the cloud of uncertainty drifting over from the Eurozone. The latter will also dampen UK exports to the EU, although our exports to the BRICs and other emerging markets should continue to grow more strongly.

Please download the report above to see the full analysis.