Vicky Pryce, a prominent economist, has raised alarms about a potential recession in the UK, especially if the US economy falters. Speaking on GB News, she emphasized the ripple effects of a US downturn on the UK, signalling a serious concern for Chancellor Rachel Reeves. January revealed a surprise contraction in the UK economy, which shrank by 0.1% primarily due to a slump in the production sector.
Despite the contraction, the Office for National Statistics (ONS) reported a modest 0.1% growth in services output, a slowdown from December’s 0.4%. In the same breath, production output fell by 0.9%, and construction declines persisted for two consecutive months, dropping by 0.2%. Nicholas Hyett from Wealth Club remarked on the bleak news just ahead of the Spring Statement.
Pryce pointed out that, paradoxically, consumers currently enjoy some degree of financial relief with wages rising faster than inflation. Moreover, she highlighted potential interest rate cuts and minimum wage hikes as factors that could enhance consumer spending power. She acknowledged worries over job stability due to National Insurance contributions, yet noted, “the consumer should be feeling better and spending more.”
The Bank of England has adjusted its growth forecast for 2025 from 1.5% to 0.75%, reflecting growing concerns over the economy’s trajectory. As Chancellor Reeves prepares for the Spring Statement on 26 March, she will unveil economic forecasts that will evaluate the impact of her recent tax policy decisions. Reeves has justified her business tax increases as essential for public service investment.
However, Pryce warned that reliance on consumer spending cannot sustain long-term economic health. She pointed out that struggle in the construction and production sectors could threaten stability. While the likelihood of an imminent recession is not guaranteed, the UK remains susceptible to fluctuations in global economic conditions. “Any few little changes could happen and it could go the other way,” she concluded, highlighting the delicate balance of the current economic landscape.
Prominent economist Vicky Pryce warns of a potential recession in the UK if the US economy deteriorates, following a surprising 0.1% contraction in UK GDP in January. Despite consumers benefiting from rising wages, Pryce cautions that this is not a sustainable solution, especially with ongoing struggles in vital sectors. The Bank of England has halved its growth forecast, highlighting the vulnerable state of the UK economy ahead of Chancellor Rachel Reeves’ Spring Statement.
UK economist Vicky Pryce has issued a warning regarding the potential for a recession, tied closely to the health of the US economy. The unexpected contraction in the UK’s GDP by 0.1% in January is a pivotal concern for Chancellor Rachel Reeves, especially with the Bank of England slashing growth forecasts. While consumers currently enjoy some relief through rising wages, this cannot replace sustainable economic growth driven by productive sectors. Overall, the UK’s vulnerability to external economic shifts necessitates cautious navigation in the upcoming Spring Statement.
Original Source: www.gbnews.com
