The outlook for the UK economy

Abstract

The UK economy is likely to put in a solid performance during the next two years. Economic activity is expected to grow at a below-trend rate of around 1.7 per cent this year, with the impact of sharp equity market falls, a weak global economy and manufacturing sector fragility largely offset by a lower interest rate profile. Conditions remain in place for recovery to around-trend growth in 2003–04, as the world economy picks up speed. That said, the probability on the central forecast has been reduced, reflecting increased downside risks. If the downside were to materialise, margin pressures would tend to intensify in thin trading markets. Business propositions should therefore be examined for vulnerability to potentially weak pricing leverage, as well as to the risk of more subdued demand growth for an extended period. Copyright © 2002 Henry Stewart Publications