When Rishi Sunak entered No10 in October 2022, both he and his Chancellor, Jeremy Hunt, made clear that driving down inflation and fiscal stability were their priorities. At the time, inflation was hovering around the 10% mark – the highest of my lifetime – fuelled by spiralling energy prices across Europe and the UK was predicted to fall into the “deepest recession in 100 years” according to certain economists.
Fast forward 18 months and the outlook is very different. As of today, inflation stands at 2.3%, a whisker away from Bank of England’s 2% target. Last Friday, the Chancellor told an audience how sticking to his plan had “delivered the soft landing many thought impossible.” After the “shortest and shallowest recession” on record, official figures published last week showed that the UK had started the year with the fastest growth of the last two years (GDP growth of 0.6%). On 21 May 2024, the IMF revised its forecast on UK economic growth, estimating that we will be the fastest growing G7 economy in Europe next year and overall throughout the 2024-28 period.
Unemployment in West Berkshire stands at around its lowest rate in the last 50 years, with just 2.2% of residents claiming unemployment-related benefits. And real wages have risen for ten months in a row, with average wage growth at 6% per year, significantly outstripping the current rate of inflation. This has been achieved by a steady hand on the tiller, public sector spending restraint and working closely with the Bank of England. It is now highly likely that the Bank of England will reduce interest rates in the months ahead.
In the Budget, the Chancellor announced a further National Insurance cut, taking the overall rate down from 12% to 8%. This is worth around £1,100 a year to a West Berkshire resident earning the median wage (£40,500). And the biggest expansion of free childcare in history will be worth around £6,900 to the average eligible working family once it is fully implemented next year. Already, it is estimated that 200,000 parents are now benefitting from the first stage of funded childcare for their 2-year-olds and applications are open for all children from 9-months from September. In the long-run, it is forecast that this will remove barriers to work for over 400,000 parents.
This isn’t to say that everything has been easy. Of course it hasn’t. The last five years have been some of the hardest in living memory. But what is happening today is more than just a few “green shoots”. Living costs are coming down, wages are going up and the economy is growing in strength.
West Berkshire businesses – many of which are the vanguard of new economic growth sectors like technology, communications and life sciences – are amongst those showing the most sustained and impressive performance in the UK. We have taken the tough decisions and the have now undoubtedly turned a corner.
