Bank of England is unlikely to cut interest rates any time soon and Treasury unlikely to cut taxes due to fear of higher inflation
Like a sailing ship trapped in the doldrums, Britain’s economy is going nowhere. The latest official growth figures for the third quarter of 2023 show the sideways drift of the past 18 months continuing. Without population growth the performance would have been even weaker.
Clearly, higher interest rates are having an impact. The UK economy is heavily reliant on the residential housing market to propel it forwards, and that engine has been shut off as a result of the steady increase in the cost of borrowing from the Bank of England since December 2021.
Residential investment, which is especially sensitive to changes in interest rates, fell by 1.7% in the three months to September and has now dropped for four successive quarters.
