The UK economy in 2022 experienced a recovery period from the COVID-19 pandemic. Despite the pandemic, the economy grew by 4.1% in 2022, and unemployment rates dropped to 3.7%. However, according to the International Monetary Fund (IMF), the UK is the only G7 country that might face a recession in 2023.

You may wonder:

• What does 2023 look like for the UK?
• What does it mean for businesses and investors?

Why is it important to know about the predictions?

Predicting the economic outlook for 2023 is crucial for you, especially if you’re an entrepreneur or investor. It can help you plan operations, investments, and budgets. Plus, investors rely on economic forecasts to make informed decisions on stock markets, bonds, and other investment vehicles.

A sound understanding of the economic outlook can help to mitigate risks and maximize returns. So, without further ado, let’s explore some of the most important predictions about the UK economy for 2023.

Key predictions for 2023

There are several predictions for the UK that are worth paying attention to. Here are some critical forecasts for 2023:

French workers to overtake the UK workers

There could be an increase in the number of French workers. Analysts expect that:

• French workers may overtake British workers. They may become the fourth-best-paid workers in the G7.
• French workers will have higher real wages than British workers for the first time since the 1990s.
• The difference in real wages between the two countries is due to a combination of factors. These include higher productivity growth and more favorable economic conditions in France.

The reasons could be weak productivity growth, the impact of the COVID-19 pandemic, and Brexit-related uncertainty in the UK.

Increased cost of the weekly food shop

In the UK, inflation has significantly driven increased food prices in recent years. If this trend of food price increases continues, the following may happen:

• The weekly food shop cost for the average household may rise by around £100 in 2023.
• Low-income households are likely to be the hardest hit by increased food prices.

Declined UK house prices and sales

Contractions in the UK housing market are relatively rare. But there have been a few notable exceptions, such as the financial crisis of 2008.

Currently, the UK is particularly exposed to a downturn in the housing market compared to other economies. This is due to the high proportion of household wealth held in property. Thus, analysts predict that UK house prices may decline by around 8% in 2023.

During a housing market downturn, homeowners tend to hold off on selling their properties until prices improve. This is because they may not want to sell their properties at a lower price than they had initially paid. This tendency to hold off on selling contributes to a fall in the number of house sales.

The total number of residential transactions valued over £40k will fall from 1.2m (2022) to 0.8m in 2023. This could be due to the possible fall in house prices and the economic uncertainty because of COVID-19.

More than three-hundred thousand to rejoin the UK labor market

The UK has one of the highest levels of economic inactivity in the European Union. It has a working-age population of 21.3% that is not in employment or seeking employment. The Covid-19 pandemic has further exacerbated this issue. After all, many workers left the labor market. The reasons were job losses, caring responsibilities, or health concerns.

Analysts expect more than three hundred thousand British workers will rejoin the labor market in 2023 as the economy recovers from the Covid-19 pandemic. This influx of workers will likely increase the labor supply, which may put downward pressure on wages. However, it is also likely to increase productivity and output as businesses have access to a larger pool of workers.

Direct contribution of new immigrants to the UK economy

In the year to June-2022, the UK experienced record-high levels of immigration, with a net inflow of 673,000 people. This is the highest level of immigration since comparable records began in 1955. 

Analysts expect new immigrants to make a direct contribution of £19bn to the UK economy in a number of ways:

• They may fill gaps in the labor market, especially in highly skilled markets. 
• They may also start businesses, invest in the UK economy, and pay taxes.

However, the new immigrants in the UK can help reduce staff shortages in highly skilled sectors. But some may argue that immigration can lead to increased competition for jobs and housing. In contrast, others may say that it can boost productivity and economic growth.

Wrapping up

The fall in real wages and increased food prices may lead to a difficult financial situation for low-income households. The decline in house prices and the fall in the number of house sales may affect the broader economy. The reason could be a high proportion of household wealth held in property. 

However, rejoining more than three hundred thousand British workers to the labor market and the direct contribution of new immigrants to the UK economy may increase productivity and output. It remains to be seen how these predictions will play out. And it will be necessary for individuals to monitor the situation closely and adapt to any changes.

If you still have questions or concerns about your finances, consult with GJM & Co. Our experienced accountants can guide on financial policies, helping you to understand them better. We can help you shape your business in the best way possible to make the most of 2023 despite the challenges and risks that linger. 

Should you have any queries or need consultation, Schedule a Call today or write to us at info@gjmco.in.