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The UK economy’s mixed report card for 2023 amplifies this year’s tension between what election politics is likely to deliver and what the economy needs to break out of a low-level growth/productivity equilibrium.
Compared with a year ago, the UK has put behind it the horrible risk of a big financial crisis that would have demolished its pension system and crippled the mortgage system. The country has more than halved its inflation rate from 10% last January to 3.9% and has finally seen real wages grow. With the weekend’s two-percentage-point cut in the main national insurance rate to 10%, benefiting 27 million people, the average family will realize £450 ($572) in annual savings. Meanwhile, mortgage rates and other borrowing costs have been coming down as markets expect the Bank of England to embark soon on a rate-cutting cycle.
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