Loss of UK economic momentum signalled by finance professionals, says ACCA

The UK economic outlook from Q3 2023 continues to look weak, despite a small uptick in growth from Q2, according to the latest Global Economic Conditions Survey (GECS) from ACCA and IMA. 

The GECS Q3 2023 survey data reveals a fragile global economy balanced carefully between high interest rates and contracting growth. A sharp decline of confidence in key markets (North America and Western Europe) stands out in particular. The knock on effect of this to the UK economy and the Bank of England continues to ripple out. 

The Bank of England’s decision to hold interest rates at 5.25% in September 2023 was a close cut result. However, with lower inflation making steady progress and the jobs market easing, the pause on interest rates was welcomed by many, despite wage growth continuing at a rapid pace and inflation remaining well above target. 

The rise in government bond yields does pose a risk to the economy by causing further slowing – careful monitoring and responses by financial professionals will be needed to take swift, appropriate action.

What this means for UK businesses is a mixed outlook. While growth is welcome, the low percentage means it is being outpaced by inflation, and real wage earnings are fighting to keep up. A weaker housing market is also causing a knock on effect, slowing down buyers from getting on the ladder and cash is being held on tightly by earners rather than spent. 

Accountants face a difficult job of planning for 2024 with an air of caution, monitoring all financial ingoings and outgoings with laser precision. Cost pressures from inflation will likely weigh heavy on the minds of accountants, while avoiding being too conservative with their outlook in the ‘stagflation’ era. 

Discussing the GECS Q3 survey results, chief economist at ACCA, Jonathan Ashworth, said: “Overall the GECS survey remains consistent with some further loss in global economic momentum, although it does not suggest that a downturn is imminent. That said, the risks to global growth are heavily stacked to the downside. These risks include the lagged impact of past monetary tightening, soaring government bond yields, rising oil prices, the Chinese economy, and geopolitics. Accountants should advise their firms or clients to plan accordingly.”

Gemma Gathercole, strategic engagement lead for England, ACCA, said: “The UK data retrieved from GECS Q3 shows a mixed picture. What we’re seeing from members is caution, adopting a ‘wait and see’ approach before making any key decisions. 

“Controlling inflation is essential to our members, many of whom support SME businesses and are most likely to feel the heavy costs of suppliers and narrowing margins first before the larger companies. We have seen that financial professionals want to err on the side of optimism, but more economic stability is needed to help make that happen.”