Yael Selfin, Chief Economist at KPMG UK noted that the UK economy emerges from downturn while “risks of further headwinds rise.”
Yael Selfin from KPMG also mentioned the UK GDP returned to growth after two consecutive months of decline, with “growth potentially accelerating in 2025.”
They added that household balance sheets “remain healthy and coupled with continued strong wage growth, this could spur further pick-up in consumer spending.”
Selfin further noted that government spending could also “become a key driver of growth this year, given the front-loaded nature of its spending plans announced last autumn.”
They continued:
“Nonetheless, downside risks to the outlook could dampen growth this year. Financial conditions have tightened considerably in recent weeks, driven by concerns over global trade and rising inflation which could see interest rates remain higher for longer. Tighter financial conditions and a gloomy business mood on the back of higher taxes and a potential escalation in trade conflicts could set back business investment, a notable bright spot in 2024.”
Selfin pointed out that GDP growth in November was driven by “a recovery in construction output and the food and beverages sector.”
They also stated that the recent data likely signals the “end of the sluggish activity seen in the economy over the previous two months.”
KPMG UK expect growth momentum to have “continued into December, which together with a weaker October could lead to overall growth of 0.1% in the final quarter of 2024.”
Karim Haji, Global and UK Head of Financial Services at KPMG, comments on today’s Q4 Credit Conditions survey from the Bank of England:
“These latest figures mark the eighth quarter in a row where lenders have reported a rise in mortgage defaults. This points to the financial strain on households as many are hit by higher mortgage rates in an environment which is still challenged by high cost of living and uncertain future interest rates.”
They added that against a backdrop of weak UK growth and continued inflationary pressures, we may see “defaults continue to rise in the months ahead. Recent shifts in expectations on when and by how much interest rates are likely to fall mean households might expect more financial pain for longer.”
They also shared:
“While some other areas of credit remain stable, such as default rates on unsecured lending which fell, the rise in mortgage defaults highlights ongoing economic uncertainty and suggests that many households are still feeling the financial pinch. The slight rise in unsecured lending suggests households continued to struggle with cost-of-living challenges in the run up to Christmas, which can be an expensive period for many.”
They concluded that lenders need to take a “cautious approach to credit applications considering these latest default rates and offer the necessary support to those who have struggled financially over the festive period.”
