United Kingdom – 2024-2025 Scenario: future looking brighter?

UK economic growth was sluggish in 2023, with a slight recession in the second half of the year as tight monetary policy weighed on demand. Economic activity grew strongly in first-quarter 2024, although household consumption remained low. 
Domestic demand, and household consumption in particular, is expected to be the main driver of the coming recovery, driven by solid real income growth and future rate cuts. In the short term, households could continue to be overly cautious given past price shocks, high interest rates and an ongoing easing in the labour market. The investment outlook is accompanied by an upward bias thanks to the advent of a period of political stability and Labour’s pro-business policy. 
Inflation returned to the 2% target in May 2024 (and was stable in June) amid widespread disinflationary pressures. It is expected to return to slightly above the target in the second half of the year on less negative inflation in energy prices. 
Given the continued easing in the labour market and the prospect of inflation below the medium-term target, the BoE is expected to start a very gradual cycle of monetary easing on 1 August, though a further postponement is not to be ruled out.