UK Economic Outlook

Housing market prospects and an international comparison of the UK’s labour market performance

July 2019

Summary

We project UK economic growth to remain modest at 1.4% in 2019 and 1.3% in 2020, compared with its long-term trend rate of around 2%. These projections assume that a Brexit deal is eventually agreed leading to an orderly exit from the EU. Risks are weighted to the downside due to the possibility of a more disorderly Brexit.

Consumer spending has continued to drive the economy, but the housing market has cooled and job creation is likely to slow over the next year. Business investment has been on a declining trend as a result of ongoing Brexit-related uncertainty and this is expected to continue until this is resolved.

Consumer price inflation is projected to remain close to the Bank of England’s 2% target, with interest rates expected to remain on hold for at least the rest of 2019.

Download the full report below for our detailed analysis, including special features on the outlook for the housing market and an international comparison of the UK labour market. And use our data tool to compare the affordability of private rent for different occupations in across the UK.

 

UK labour market performance has improved significantly, but many OECD countries still do better - matching Swedish performance could add up to £250bn to UK GDP

The labour market has been one of the strongest elements of the UK economy in recent years, with the employment rate at a record high. Employment has grown significantly for women and older workers, while youth unemployment rates have fallen back to levels seen before the global financial.

Our detailed international analysis in this report suggests, however, that there is still room for further improvement. In a new composite PwC Labour Market Performance Index, which combines results from our Youth Employment, Golden Age and Women in Work indices, we find that the UK still ranked only 19th out of 33 developed (OECD) economies in 2018. Iceland and Sweden top these rankings, while most OECD countries have seen improvements in their employment rates for women and older workers since 2007.

If the UK could further improve its performance to match Sweden in terms of its employment rates for women aged 25-54 and older workers, and the proportion of its young people not in employment, education or training, we estimate that the boost to UK GDP could be as much as 12%, or around £250bn.

Realising this potential will require further efforts by government and business to boost childcare provision, support later retirement and flexible working, enhance lifelong learning and improve vocational education and training provision.

Private rents unaffordable for many key workers in London and Southern England despite housing market slowdown

The UK housing market has slowed significantly in recent years, particularly in London and the South East where we expect it to be negative in 2019.

UK house prices could start to pick up again gradually from 2020 onwards if an orderly Brexit can be delivered, but there is considerable uncertainty around this outlook at present.

By historical standards, however, the level of house prices remains high relative to earnings, particularly in and around London. There are also wide regional variations in the cost of private renting and our detailed analysis in this report shows that median private rents in London, the South West, the South East and East Anglia are above a commonly used threshold of 30% of incomes that deems them unaffordable. Key workers such as nurses and teachers in these regions also often face rents above this 30% of income affordability threshold.

High private rent levels may prevent people who work in key professions from living in or moving to London and Southern England, leading to shortages of nurses, teachers and other key workers, as well as limiting economic and social mobility across the country.

Download the full article

Please explore further how private rental affordability varies across Great Britain for different occupations using the interactive data analysis tool below.

Please select an occupation, a UK region and a year (2012 or 2017) in each of the two panels below to compare the affordability of private rents in the two maps. Generally, you should just vary only one of the three variables (occupation, region or year) between the two maps to get a meaningful comparison.

Comparable data were not available for Northern Ireland
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Rental affordability is calculated by dividing the median private rent by the median gross income for the occupation, region and year selected.

Source: PwC analysis of ONS data.

Comparable data were not available for Northern Ireland

Contact us

John Hawksworth

Chief UK Economist, PwC United Kingdom

Mike Jakeman

Senior Economist, PwC United Kingdom

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