Will 2024 be a better year for the UK economy
2 January 2024
The new year is traditionally a hopeful time, where we contemplate the exciting possibilities that a fresh start can offer us. But this January, our optimism has been tempered by a deluge of dire economic announcements at the years end.
It seems 2023 – a truly dismal year for the UK economy which saw tens of thousands of businesses buckle under the dual pressures of rising costs and falling sales – was determined to have the last word. Most of us had barely finished putting up our Christmas decorations before the bad news began trickling into our inboxes.
No wonder then that confidence in the economy is extremely low right now, with two thirds of UK companies expressing concerns over what 2024 will mean for their business. Are these fears unfounded, I hear you ask, or can we expect another year of economic turmoil?
Let’s get the bad news out of the way first.
The UK economy is shrinking. As we enter 2024, we are already halfway towards a technical recession. ONS figures reveal GDP fell between July and September last year, and flatlined in the previous quarter. If this trend continues into quarter four, a real possibility as GDP dropped by 3% in October, then we will be facing our first recession since the height of the Covid outbreak.
Government debt is also spiralling out of control, exceeding 100% of GDP for the first time since the 1960s. With UK businesses straddled with £50 billion of tax debts, we can expect HMRC to continue using the aggressive collection and enforcement tactics it adopted last year to refill the government depleted coffers. This means more winding up petitions, stricter criteria for time-to-pay agreements, and more companies forced into liquidation. The Centre for Economics and Business Research predicts 28,000 UK companies will face insolvency in 2024.
As for the cost-of-living crisis, food prices continue to rise, though at a slower pace, and according to Ofgem, energy prices are set for yet another increase in early 2024.
Now for the good news.
Inflationary pressures are starting to ease. Inflation dropped by 3.9% in November, well above what was expected. While this is still far above the 2% rate the Bank of England aims for, it does mean the government has lived up to its promise to cut inflation in half. Lower fuel prices are also a welcome reprieve for British businesses, as is the rallying effect the drop in inflation had on the UK stock market.
Expectations are now high that the Bank of England will lower interest rates in 2024, offering much-needed relief for businesses who have seen the cost of debt skyrocket on the heels of 14 consecutive interest rate rises.
It is also possible the risk of a recession has been overstated. It certainly wouldn’t be the first time we’ve avoided a recession by the skin of our teeth, and even if we do slide into a recession, it could prove as short-lived as in 2020. There is no reason yet to believe it will have anywhere near the impact of the 2008 crash.
We won’t know for certain until the ONS releases the quarter four figures in March, so let’s not borrow trouble. Focus instead on ensuring the businesses you work with are as strong as they possibly can be, so they are fighting fit to face whatever challenges 2024 presents.
Key to this, is getting the right support. If a company has debts, they should seek professional advice to cut costs through loan consolidation or repayment plans. If there are concerns over unprofitable elements of the business, restructuring to protect profits is a viable option.
Whatever issues a business is facing, there are usually solutions if you catch the problem early enough. My advice to struggling firms is this, instead of waiting and hoping for an economic upturn to save the business, make it your new year’s resolution to seek out practical solutions to put it back on a stable footing, come what may.