The UK economy is expected to perform worse than other advanced economies in 2023, according to the IMF, which cited the negative impact of high energy prices, lower productivity, high inflation and monetary tightening..
- The UK economy grew by 0.1% in November
- Consumer confidence weakened once again
- Retail sales disappointed over the holiday period
IMF negative towards UK: the UK economy is expected to perform worse than other advanced economies in 2023, according to the International Monetary Fund (IMF) , which cited the negative impact of high energy prices, lower productivity, high inflation and monetary tightening. Having expanded by 0.5% in October, the UK economy grew by 0.1% during November, lifted by activity around the FIFA World Cup. The FTSE 100 Index rose by 4.3% during January, while the FTSE 250 Index climbed by 5.3%.
“Although energy price inflation slackened, food price inflation continued to increase, hitting 16.9%”
Food price inflation continues to bite: the UK’s annualised rate of inflation eased in December from 10.7% to 10.5%, raising hopes that a peak in inflation might encourage the Bank of England to moderate the pace of its monetary tightening. Although energy price inflation slackened, food price inflation continued to increase, hitting 16.9%.
Consumers feel the pinch: retail sales volumes fell in December by 5.8% compared with the same month in 2021, striking a blow to the UK retail sector, which relies heavily on spending over the festive period. Elsewhere, having rallied slightly towards the end of 2022, UK consumer confidence deteriorated once again in January as inflationary pressures continued to bite. Households have become less likely to spend on big-ticket items and consumers appear pessimistic towards the economic outlook.
Dividend payouts set to fall in 2023: dividends paid by UK listed companies during 2022 rose by 8% on a headline basis compared with 2021, according to a study undertaken by Link Group’s quarterly Dividend Monitor . Total payouts of £94.3 billion were boosted by the pound’s weakness. Looking ahead, however, Link Group expects total dividends, including special dividends, to decline by 2.8% in 2023 to £91.7 billion as companies respond to faltering economic growth and higher interest rates.
Profit warnings on the rise: UK listed companies issued a total of 305 profit warnings during 2022 – a 50% increase on warnings in 2021. According to a quarterly study undertaken by EY , half of the companies that issued warnings cited the impact of higher costs. Although profit warnings were particularly concentrated in the consumer sector, EY found that warnings are spreading across other areas of the economy. With the percentage of UK-listed companies issuing profit warnings already at 2008 levels, EY warned that insolvencies are set to rise this year.
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