Can the UK save itself from a recession?

With just two trading days remaining until the new year, attention in the City of London is shifting towards the prospects for 2024. Questions about the pace of interest rate cuts, the possibility of the UK avoiding a recession, the timing of the general election, and the potential victor are in focus. One point of view indicates a more optimistic outlook for the UK as it "turns a page from the difficult post-pandemic years." PwC identifies various reasons for this optimism, including an anticipated improvement in conditions for households as the minimum wage is set to increase by almost 10% in the spring. Predictions suggest a faster-than-expected decline in inflation, nearing the UK's 2% target, contributing to a positive shift in consumer sentiment and while growth is anticipated to be modest, the UK is projected to exhibit a faster recovery relative to pre-pandemic levels compared to Germany, France, or Japan. Forecasts indicate that the UK will be the fourth-best performing G7 economy concerning pre-pandemic levels, with real GDP expected to be around 2.7% higher in 2024 on average relative to 2019 levels. However, challenges persist as consumer prices, despite an expected cooling of inflation, are projected to remain about a quarter higher than in early 2021 and with London's average rents are forecasted to continue rising, reaching over £2,000 per month by the end of 2024, approximately three times higher than the north-east's average while the rest of the UK is also expected to witness a continued uptrend in rents, with an average increase of over 5% in 2024. Additionally, a notable surge in corporate insolvencies is anticipated, with nearly 30,000 firms expected to face challenges due to high interest rates and increased costs which is likely to be felt more acutely by smaller businesses, particularly in sectors such as hotels & catering, manufacturing, and transport & storage and which could cause significant issues if it were to lead to an increase in unemployment just as the Bank of England is beginning to shift its policy and in particular around election period, potentially further influencing the ultimate results.