Prospects for consumer spending and regional growth
projected UK GDP growth in 2019
projected UK GDP growth in 2020
projected share of housing and utilities in total consumer spending by 2030
projected economic growth in London in 2019
We project UK growth to dip to 1.1% in 2019 and to strengthen only moderately, to 1.6% in 2020. Slow growth this year reflects the drag on business investment from ongoing economic and political uncertainty relating to the outcome of the Brexit process. Our main scenario assumes an orderly exit from the EU with a transition period, with business investment and GDP growth picking up later in 2019 and in 2020. But short-term risks are weighted to the downside due to the possibility of a more disorderly Brexit.
Consumer spending has driven the economy recently and has itself been supported by increases in real income growth. But the housing market has cooled, further rises in household borrowing may be hard to sustain and uncertainties regarding Brexit could combine to see consumer spending growth slow to around 1.4% this year, from 1.9% in 2018, before picking up slightly in 2020.
Service sector growth should remain modest but positive in 2019, but manufacturing growth is likely to contract this year amid Brexit uncertainty. Construction sector output has been sluggish in the past 18 months owing to the weakness of commercial property investment and looks set to remain relatively weak in the short term.
In our main scenario, with an orderly Brexit, we assume that the Bank of England raises interest rates by a quarter of a percent to 1% in the second half of 2019. But the precise timing of this will be data-dependent and the pace of any subsequent rate increases are likely to remain gradual.
Download the full report below for our detailed analysis, including special features on consumer spending and regional growth. And use our data tool to compare how different UK regions have performed over the past 50 years in terms of economic and population growth.
Given the strength of the labour market, we project real household disposable income growth to pick up in 2019 and 2020 to 2%. However, temporary uncertainty around the outcome of the Brexit process means that real household spending growth could slow this year, resulting in a higher savings rate.
We expect households to spend a larger share of their budgets on housing and utilities, with the proportion reaching more than 30% by 2030, up from 27% in 2018. The share of spending on financial services and personal care will also tend to increase, while the share spent on necessities such as food and clothing will fall.
Online sales are likely to become a more important part of consumer spending. The proportion of sales conducted online doubled in each of the food, furnishing and clothing categories between 2010 and 2018. We project the online share of total retail spending could rise between 2018 and 2030 from 5% to 8% for food, from 10% to 22% for furnishings and from 18% to 32% for clothing.
London has outperformed other UK regions for most of the past 30 years in terms of economic growth. This is in marked contrast to the 1970s and early 1980s when London’s average growth rate was lower than the UK average due to people moving out of the capital.
Much of London’s historical outperformance is linked to the boom in financial and business services following the financial deregulation of the mid-1980s, as well as its relatively low manufacturing share and its ability to attract skilled international migrants.
More recently, there have been signs from housing and labour markets that London’s relative performance was less strong in 2018. We expect this to continue in 2019-20, with London growing only slightly faster than the UK average rate.
Use our interactive tool below to explore the data, clicking through the five decades to see how each of the UK’s regions have performed over time.