The state of the UK economy
“This pandemic has provided an opportunity to rest. This is our chance to accelerate our pre-pandemic efforts to reimagine economic systems, that actually address global challenges like extreme poverty, inequality and climate change.”- Pierre Poilievre
The state of the UK economy has caused turmoil for many hanging on by a thread, with the cost-of-living soaring and inflation reaching 9.9%, making the cost of living much more expensive. The cost of grocery inflation alone has reached an alarming 13.9% over 12 weeks to the 2nd of October, resulting in a £643 increase in a typical yearly bill, according to Kantar Worldpanel findings. This showed a steep rise compared to September, where the rate was 12.4%, amounting to an additional £571 to a typical bill. The increase in food costs has significantly contributed to the added pressure on consumer prices (CPI).
Furthermore, the economy affects everything else, such as savings, electricity prices, mortgages, and rents; the effect can be either positive or negative, though unfortunately, in 2022, this has been greatly on the undesirable side. As the UK has had a slower recovery from the pandemic than initially anticipated, the UK is the only G7 country with a reduced economy than early 2020. According to official figures, this will likely further undercut the government’s tax-cutting strategy.
Moreover, the office for national statistics (ONS) published figures which showed that the economy was 0.2% smaller than in February 2020, triggered by an onset of recession during the pandemic and fragile economic recovery.
ONS previously predicted a 0.1% fall in GDP during the second quarter of 2022; however, they have revised this as the UK economy grew by 0.2% in the second quarter of 2022.
The upheaval in the British monetary market has exhibited the UK’s substantial current account shortfall. The value of imports exceeding exports has dwindled since the economic recession of 2008 and the Brexit election even though there has been a sharp decline in the pound’s value making exports less expensive.
This is according to ONS statistics which indicated that the current account gap diminished in the April-June phase to £33.8bn, or 5.5% from the £43.9bn deficit, during the first quarter, which was amended to a lower estimate.
Nevertheless, the January- March shortage was the largest to date, ONs revealed, stating the obstacles UK exporters have finding markets for their goods and services.
How has the UK economy impacted mortgages?
According to published data, the typical rate for two-year mortgages has soared to slightly under 6%; the UK government had hoped that alleviating the financial market would reduce the burden of home loan costs.
Moreover, brokers have warned that 95% of mortgages could be among the next financial fatalities, as a result, Lenders temporally dismantled their lending services after market turmoil instigated by the 23 rd of September mini budget being put in effect by retreating 40% of deals during the last week of September. However, most major lenders have re-entered and come up with new deals, such as Nationwide, NatWest, Barclays, Virgin Money, and Skipton.
There had been hoping that during some quarters of the government’s 45p tax, one-eighty and somewhat quieter market conditions might benefit mortgages through cheaper mortgage deals, but unfortunately, this has not been the case.
The data shared with the Guardian newspaper shows the overall number of new 95% goods accessible has decreased to 129- which is less than the amount on sale on the mini-budget day; this is because of concerns that homeowners could find themselves in negative equity if house prices were to drop 10% or more.
How are savings impacted by the economy?
In the UK, much of the population has a weak relationship with their money. According to the Money Charity, 46% (12.6 million) of UK households do not have any savings or have less than £1,500 in savings. People may find it challenging to save because of low-interest rates and the uncertainty on what product to go for, which has also affected consumers’ ability to save and set money aside. Another reason our ability to save may be impacted is because of the offerings that the market has presented for quite a while which often fail to meet the saver’s main saving requirements. The state of the economy also significantly impacts savings as people may have put more money towards other expenses, such as mortgages and electricity bills, due to the cost-of-living surge, leading to many neglecting their savings.
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The state of the economy may be in dire condition currently, but this does not mean that this can not change, as other economic challenges have arisen throughout the centuries, with the most remembered in the 21 st century being the financial crisis of 2008. However, the economy worldwide has never fully recovered; the economy internationally did make leaps and bounds since 2008.
However, after Brexit, the pandemic lockdowns and the war in Ukraine, the UK economy has deteriorated seriously.
In addition, the ability to save is becoming increasingly complicated by the deteriorating state of the economy and the obstacles made by the cost of living and increased expenses.
Consequently, during this challenging time, many will need to reduce savings; however, saving is more important than ever and continuing to save can help many through many difficulties. For instance, at the pandemic’s peak, many people could save more than they had saved before the pandemic; during the global outcry, households were still able to increase their savings pots. There are sometimes positives even amid challenges, despite this often not being recognised during the epicentre of tedious challenges.