1、2024 UK Economic and Consumer ForecastFebruary 2024Teneo Economic InsightsContents and authors22024 UK Economic and Consumer Forecast01Executive summary0302The UK labour market is starting to loosen,leading to increased unemployment in some sectors0503UK inflation will continue to fall,but we expect

2、 it to bottom out above the 2%Bank of England target1504Continued wage growth will provide some household relief,but expenditure remains constrained1905Despite small increases in real wages,we expect consumer spending to be constrained2706What does this mean for H1 2024?32Gee LefevreSenior Managing

3、DirectorTravel,Leisure,and Hospitality Practice LeadGee.L+44 20 3206 8860Kabir SeehraSenior ManagerKabir.S+44 7584 103640Professor Jonathan PortesSenior AdvisorFormer Chief Economist to the Cabinet OfficeMichael FattoriSenior ConsultantMichael.F+44 20 7367 4106Jessica EganDirectorJessica.E+44 20 320

4、6 8857Executive summarySection 01Executive summaryFalling inflation and upward wage pressure are resulting in household relief after two years of real wage decline.However,continued pressure from mortgage rates and debt accumulation means we expect consumer spending to remain suppressed.42024 UK Eco

5、nomic and Consumer ForecastFalling inflation combined with upward wage pressure has meant real wages rose in Q4 2023 for the first time in two yearsDespite this increase in real wages,the household cash position is still worse than in 2021,with households impacted by rising housing costs,taxation an

6、d servicing debtContinued pressure on household cash particularly households that have historically accounted for material spending power will have a knock-on impact on consumer expenditure,which will continue to be constrained in 2024Households are not impacted equally;we are observing that upper-m

7、iddle income households with private mortgages are most impacted(these households are predominately between the ages of 30-49)Slow growth and recessionary pressure are causing the UK labour market to soften after two years of tight supply and rising demand following COVIDDespite the softening labour

8、 market,we expect upward wage pressure to persist into 2024,albeit at a lower level than observed in 2023Wage pressure is primarily being driven by minimum wage increases and supply constraintsAt the same time,we have observed inflation falling faster than expected to 4.0%in Jan 20242The result of t

9、his is likely to be continued low and stagnating growth in 2024 at a GDP level94367581The UK labour market is starting to loosen,leading to increased unemployment in some sectorsSection 026At its simplest,the labour market is dictated by two themes:the number of individuals available to work(supply)

10、and the number of jobs available(demand).What is happening in the UK labour market?Strength of the economyLabour and government policySize and growth of the working age populationMigration policy:how many workers are entering and working in the labour market?Labour market supplyHow many workers are

11、available?Labour market demandHow many jobs are available?The UK saw a decline in the number of available workers post-COVID.This low supply resulted in near-record numbers of vacancies.The average number of vacancies in 2023 stood at c.1.1m.This resulted in upward pressure on wages.Wage growth reac

12、hed an estimated 6.5%in 2023,one of the largest annual increases outside the COVID period.2022 and 2023 saw a tight labour market,driven by labour shortagesKey driversMarket factorsSource(s):Financial Times;ONS;Teneo research and analysis 2024 UK Economic and Consumer Forecastthis trend has reversed

13、 in 2023,driven by a recovery in the number of workers re-entering the workforce and working population growth32.8m32.7m32.9m254k 294k 128k 79k 226k 162k 399k 57k 155k 31k Total#workingage individuals,2019Working agepopulationgrowth(incl.migration)Family carersre-enteringworkforceChange in#ineducati

14、on orretiredIncrease inillnessOtherTotal#workingage individuals,2022Working agepopulationgrowth(incl.migration)Family carersre-enteringworkforceChange in#ineducation orretiredIncrease inillnessOtherTotal#workingage individuals,2023Between 2019 and 2022,we observed a net decrease of 162k workers,putt

15、ing pressure on workforce supply.This trend reversed in 2023,easing supply shortages.However,we are still seeing growing numbers leaving the workforce due to illness.Labour supply:How did the supply change in 2023?7Source(s):ONS;Teneo research and analysisNote(s):1.Other includes people who(i)are wa

16、iting the results of a job application,(ii)have not yet started looking for work,(iii)do not need or want employment,(iv)have given an uncategorised reason for being economically inactive,or(v)have not given a reason for being economically inactive.A decline in economic activity due to long-term ill

17、ness put significant pressure on the UK labour market between 2019 and 2022399k workers left the labour market due to sickness and have not returned.The COVID period witnessed a workforce contraction,primarily fuelled by a surge in long-term illnesses.A further 155k individuals left the workforce in

18、 2023 due to illness.2023 saw recovery in worker numbers as individuals re-entered from education,caregiving and retirement,alongside population growth fuelled by net migration.However,the number of people leaving the workforce due to illness is growing.In total,618k working-age individuals left the

19、 workforce between 2019 and 2022.Between 2022 and 2023,238k returnedAB2024 UK Economic and Consumer ForecastLabour supplyLabour demandSource(s):ONS;Teneo research and analysis0100,000200,000300,000400,000500,000600,000700,000800,000200002248Recovery in lab

20、our market supply(seen in working age population growth on the previous slide)across 2023 has primarily been driven by net migration,which hit record highs across 22 and 23.Labour supply:How did net migration impact supply?New visa rules are expected to constrain supply Foreign care workers will no

21、longer be able to bring dependants to the UK as part of their visa.The earning threshold for overseas workers will increase from 26,200 to 38,700.The 20%going-rate salary discount for workers filling jobs in industries with labour shortages will be removed.These rules will combine with the already-a

22、nnounced restrictions on the ability of students to bring dependents to the UK.However,recent changes to visa rules are likely to impact net migration in 2024,reducing the number of available workers from outside the UK,constraining supply.Labour supplyLabour demandNet immigration is estimated to ha

23、ve reached 672k as of Jun 2023The new visa restrictions will look to reduce net migration by an est.300k across 2024Forecast2024 UK Economic and Consumer ForecastNet migration between 2012-2024e(Jun to Jun)in peopleNet migration into and out of the UK for all nationalitiesKey takeaways9During 2024,w

24、e believe labour supply will remain constrained.While we are seeing UK nationals re-entering the workforce since COVID,illness and restrictions on migration will impact supply.Source(s):Financial Times;UK House of Commons;Teneo research and analysis“Those who are already economically inactive are be

25、coming sicker,meaning theyre less likely to return to work.There is a nagging concern that UK labour shortages are the shape of things to come.Lord Bridges of HeadleyLabour supply:What is the overall supply outlook for 2024?Post-COVID workforce recoveryRising long-term sickCurbs on net-migrationThe

26、UK has returned to pre-pandemic levels as individuals opting for education,retiring early and taking on caring responsibilities are returning to the workforcePost-COVID,long-term sickness rates remain high,potentially exacerbated by sub-optimal access to care,due to growing NHS waiting lists,and the

27、 effects of Long COVIDWhile UK citizens are re-entering the workforce post-COVID,immigration policies are expected to reduce the number of non-UK nationals entering itWe expect supply to remain broadly flat in 2024Labour supplyLabour demand2024 UK Economic and Consumer Forecast10Labour demand:How is

28、 demand linked to economic growth?Following a period of recovery post-COVID,GDP declined towards the end of 2023.Historically,there has been a strong correlation between the strength of the economy and labour demand.“The UKs recent experience is an extreme example of a global shift in macroeconomic

29、volatility from demand to supply.On the demand side,there are clearer signs that softening activity is feeding into vacancies.UK Institute of Fiscal StudiesKeyRecessionary periodGDP growthJobs growthGDP stagnation with rise in unemploymentA strong post-COVID economic rebound led to job growth and lo

30、w unemployment(3.7%in 2022)This trend began to reverse in H1 2023 as economic activity slowed and labour costs roseHistorically,there has been a lag between GDP and employment,with the sharpest falls in jobs occurring after GDP contractionLabour demandLabour supplySource(s):ONS;WEO;UK Gov;Teneo rese

31、arch and analysis2024 UK Economic and Consumer ForecastChange in job growth between 1980-2023UK GDP growth and job growth rates(15%)(10%)(5%)-5%10%2589470200042005200620072008200920001620172

32、002120222023We are already observing evidence of declining demand.Vacancies fell across 2023,and we have seen an uptick in unemployment and jobless claims.Labour market demand:What happened to demand in 2023?UK vacancies for all sectors1(000),2007-2023UK unemployment rate seasonally adjus

33、ted,aged 16+(%),2007-2023 Vacancy rates fell sharply throughout 2023,indicating that labour market demand is contractingthis fall in vacancy rates appears to be translating to unemployment,which has been rising across 2023 200 400 600 800 1,000 1,200 1,40020022006200224.2%20%1%2%3%4%5%6%7

34、%8%9%20072009200023The number of vacancies has sharply decreased,down by over 25%since its peak of 1.3m in Apr 2022.Over the same period,the number of unemployment claims has steadily increased,with an increase of c.5%since the beginning of 2023.This shift signifies a fall in l

35、abour market demand.Historic precedent suggests that we are likely to see the trends continue into 2024.Falling vacancy rates are leading to a rise in unemployment11Labour demandLabour supplySource(s):ONS;Teneo research and analysisNote(s):1.Excludes Agriculture,Forestry and Fishing;2.August to Octo

36、ber 20232024 UK Economic and Consumer ForecastVacancies have been falling on average 1.5%month on month across H2 2023We have observed an almost continuous increase in unemployment from its record low of 3.6%in 202212Minimum wage increases coming into effect in April 2024 are expected to put pressur

37、e on sectors dependent on low-pay workers.This is likely to reduce demand to accommodate additional costs and therefore further stifle demand in some sectors.1%1%3%3%4%4%5%7%7%7%13%17%17%17%19%39%-20%40%60%80%100%Public administration and defence;compulsoryFinancial and insurance activitiesInformati

38、on and communicationEducationProfessional,scientific and technical activitiesTransportation and storageManufacturingHuman health and social work activitiesConstructionReal estate activitiesAdministrative and support service activitiesWholesale and retail trade;repair of motorAgriculture,forestry and

39、 fishingOther service activitiesArts,entertainment and recreationAccommodation and food service activitiesWorkforce split by level of pay,by industry,2023Source(s):ONS;Financial Times;Teneo research and analysisNote(s):1.Based on hourly pay,low pay is defined as the value that is two-thirds of media

40、n hourly earnings and high pay is defined as the value that is 1.5 times median hourly earnings;estimates for 2023 data are provisionalKey1Low-payMiddle-payHigh-payFrom April 2024,the National Minimum Wage threshold will increase by 9.8%to 11.44While raising the UK minimum wage will help further red

41、uce income inequality,this shift is expected to put further pressure on businesses dependent on low-pay workers in 2024Impact of rising minimum wageHighLowDistribution of the number of workers by level of pay(%)for each UK industryThe most impacted sectors which are expected to experience increasing

42、 labour costs are those with the lowest-pay workers We expect the net effect will be a reduction in labour demand in the most impacted sectors to accommodate cost increases Labour market demand:What is likely to happen to demand in 2024?c.18%of the UK workforceLabour demandLabour supply2024 UK Econo

43、mic and Consumer ForecastTeneo forecastTeneo forecastSource(s):ONS;UK Parliament;House of Commons;Bank of England;Teneo research and analysisNote(s):1.Excludes bonuses,calculated as the four-quarter growth in whole-economy total pay in Q4Net-impact on the labour market in 2024Labour market outlook 2

44、024Unemployment rate projection(%)2019-2026EWage growth is expected to ease going forwardAverage weekly earnings growth1(%),Nov 2023 estimatesLabour demandLabour supplyWe expect labour demand to fall further during H1 2024,resulting in some small rises in unemployment.Continued supply constraints,co

45、mbined with minimum wage increases,are expected to keep wage growth high.Continued pressure on supply due to cuts in net migration and long-term illnessmeans that despite falling demand,a significant increase in unemployment is not expected.Continued supply constraints and minimum wages keep wage gr

46、owth highWage growth is expected in 2024(albeit lower than 2023)driven by minimum wage policies and supply shortages.13Unemployment is expected to increase in the next 2-3 years to reach c.5%by 20262024 UK Economic and Consumer Forecast0%1%2%3%4%5%6%2002220232024202520262%6%6.50%4.50%2.75

47、%1.25%0%1%2%3%4%5%6%7%Wage outlook 2024but still remains strong in 2024Labour market impactKey implicationsSupply constrainedUnemployment expected to remain lowSectors with highly skilled workers will be most impacted by the new visa rules,constraining supply,and are likely to see upwards wage press

48、ure to attract talentDecreasing DemandUnemployment expected to increaseThe sectors with a higher share of lower-pay workers will likely be impacted by rising minimum wages,increasing labour costs and resulting in falling demand14Overall,unemployment is set to rise slightly in 2024,with variations ac

49、ross different industries.Supply constraints will limit increases in high-skilled sectors,while falling demand,largely due to wage factors,will drive unemployment in low-skilled sectors.Net impact on the labour market in 20244.6%4.4%5.4%5.4%1.9%3.4%2.8%2.0%1.5%2.8%2.2%1.5%2.3%1.9%0%1%2%3%4%5%6%Trans

50、port&storageAdministrative&support servicesWholesale,retail&repair of motor vehiclesAccommodation&food servicesConstructionManufacturingOther servicesMining,energy&water,agriculture,Public admin&defence;social securityHuman health&social work activitiesFinancial,insurance&real estate activitiesEduca

51、tionInformation&communicationProfessional,scientific&technical activitiesAll sectors:4.2%Source(s):ONS;Teneo research and analysisNote(s):1.Based on ONS Qualification index score for workers in each sector,England and Wales,2021(highly skilled sectors have a score of greater than 3.00)High-skilled s

52、ectorsLow-skilled sectorsFinancial,insurance&real estate activities2024 UK Economic and Consumer ForecastSkill level by sectors,May-Jul 2023UK unemployment rate by sector1UK inflation will continue to fall,but we expect it to bottom out above the 2%Bank of England targetSection 03-2%0%2%4%6%8%10%12%

53、UK inflation dropped faster than expected during the second half of 2023,driven by a decline in housing and energy costs.Gas and electricity prices have been at their lowest levels over the past two years during Q4 2023.Source(s):ONS;Teneo research and analysisNote(s):1.Miscellaneous goods and servi

54、ces;2.Health,Transport,Communication,Education;3.Clothing and footwear,furniture,household equipment and maintenance;4.Housing and energy;5.Recreation and culture,Restaurants and hotels;6.Food and non-alcoholic beverages,alcoholic beverages and tobacco Inflation categoryContribution to Jan-24 inflat

55、ionTrending contribution to inflation in last 6 months Commentary Miscellaneous10.4%The contribution to inflation of miscellaneous goods and services have been continuing to decrease since Mar 2023Other services20.4%The contribution to inflation of services prices has increased slightly vs.6 months

56、agoConsumer groups30.4%Continued fall in input costs,including energy,has driven a steady decrease in inflation contribution of consumer groups productsHousing and energy4(0.3%)Energy price contribution peaked in early Q1 2023,and pressures have reduced significantly throughout the rest of the yearR

57、ecreational services51.8%Recreational services are directly linked to energy prices,with a considerable lag,but have started falling MoM since May 2023Food and beverages61.3%Global agriculture prices have continued falling,driven by lower bread and cereal prices in Q4 2023Total4.0%UK inflation2024 U

58、K Economic and Consumer ForecastChange in percentage,May 2021-Dec 2023Historical UK CPI by categoryForecast inflation We forecast that inflation will continue on a downwards trajectory in 2024.This will primarily be driven by falling commodity and agriculture prices.17BoE inflation targetReasons for

59、 decreaseDescriptionMaterialityDecreasing oil&gas prices Wholesale prices for natural gas have been falling since the start of 2023 and have fallen by c.60%YoY as of Dec 2023 Decrease typically takes 6-12 months to impact consumer prices;we expect benefits to continue reaching the consumer in 2024HD

60、ecreasing agriculture prices Global agriculture prices were down 9%YoY in Q3 2023 The S&P GCSI Agricultural Index(a key leading indicator of UK food prices)has food price inflation falling to 0%by the start of 2024HArithmetic point YoY inflation is always measured in relation to the previous year Th

61、ere have been no shocks in 2023 of the same scale as 2022,and none are expected in 2024(e.g.,natural gas wholesale prices peaking in August 2022)MSlowing price rises Companies have already begun to reduce the speed of price increases According to BoE estimates,output price inflation in the coming ye

62、ar will fall to 4.6%;this marks the lowest reading since March 2022MDecreasing money supply UKs M2 money supply growth has fallen from 14.5%in Jan 2021 to 3.5%YoY Historically,every major deceleration has been followed by a fall in core CPI,such as in 1992,when a 18%YoY M2 decline led to a 6%decline

63、 in core CPILSource(s):ONS;Bank of England;Teneo research and analysis0%2%4%6%8%10%12%2019Q42020Q12020Q22020Q32020Q42021Q12021Q22021Q32021Q42022Q12022Q22022Q32022Q42023Q12023Q22023Q32023Q42024Q12024Q22024Q32024Q4Teneo forecast2024 UK Economic and Consumer ForecastChange in percentage,Q4 2019 Q4 2023

64、Year over year CPIKeyUK actualTeneo estimateMedium and long-term inflation prospects18In the medium and long-term,we believe UK inflation is set to remain elevated at a range of 2.5-4%due to inherent structural factors that are likely to persist.Recent worldwide supply chain disruptions caused many

65、governments to reexamine their interdependenciesNew protective legislation,such as the US Inflation Reduction Act and the EU Green Deal,have led to increased production costsDeglobalisation and protectionismWorkforce constraints post BrexitAgeing population and low replacement rateDecreasing rate of

66、 productivity growth Climate challengesAfter Brexit,c.5%of low-skilled EU workers left the UK;new migration rules have limited the ability for these individuals to be replaced by other non-UK workersFewer international students at UK universities will also reduce annual workforce entriesThe UKs agin

67、g population is putting pressure on workforce growthThe total fertility rate1 in the UK is 1.7,which is below the replacement rate,contributing to a reduced workforce in the longer termSince 2008,UK productivity has remained largely stagnant,trailing peer countries such as the US and France Since th

68、e pandemic and emergence of Gen Z in the workforce,productivity growth has trended downward,increasing unit labour costsClimate change and recent extreme heatwaves in Europe may significantly reduce the food supplyThis will particularly affect food-importing countries,such as the UKSource(s):ONS;Ban

69、k of England;Teneo research and analysisNote(s):1.The average number of children born to a woman over her lifetime“Based on the drivers of medium and long-term inflation,there is a question as to whether monetary policy in isolation can still be used to drive down rising prices.Other policy measures

70、 will likely need to be introduced to prevent inflation from persisting in the upcoming decade.Gee Lefevre,Senior Managing Director,Teneo2024 UK Economic and Consumer ForecastContinued wage growth will provide some household relief,but expenditure remains constrainedSection 04Declining inflation cou

71、pled with growing wages has resulted in real wage growth for the first time since 2021.This trend is expected to continue across 2024 and 2025.20Source(s):ONS;OECD;RSM;Teneo research and analysisReal wage impactReal wage contractionTeneo forecastAverage weekly earnings growth rates vs.UK CPI,quarter

72、ly,Q1 2021 Q4 2025KeyTotal pay(nominal)growth%CPIFor every point where nominal wage growth trailed inflation,an equivalent period of the inverse is required for real wages to recover to 2021 levelsThis recovery in real wages to 2021 levels is not expected to occur until the end of 2024 at the very e

73、arliest,despite real wage growth throughout the year0%2%4%6%8%10%12%2021-Q42022-Q42023-Q42024-Q42025-Q4AB2024 UK Economic and Consumer ForecastHousing costsWhile rising real wages are a positive sign,it does not necessarily imply increases in household wealth levels,which are impacted by rising hous

74、ing costs,taxation and servicing debt.21Household incomeIncome National Insurance Contributions(NICs)have decreased from 12%to 10%from Jan 2024.However,with tax bands unchanged,we will see a stealth tax,where an equivalent real income will be taxed at a higher rate.Households with private mortgages

75、continue to be affected by elevated housing costs.Savings are set to decrease due to higher debt servicing costs on household mortgages and less disposable income after tax,despite rising real wages.SavingsTaxationMany households have accumulated debt over the last few years and will need to serve t

76、hese debts while interests have increased.Debt costsInflation of goods and servicesReal wage impactHousehold income is determined by additional factors that are expected to have a negative impactThe net household position is more negative than real wage calculations would suggest,as they do not cons

77、ider housing,taxation,or savings2024 UK Economic and Consumer ForecastSource(s):Teneo research and analysis 22Household net cashflowTeneos household net cashflow analysis considers costs that are not included in real wage calculations to give a true reflection of the relative cash position of a hous

78、ehold.We developed a comprehensive financial model to assess UK households net financial position over time between Sep 2021 and June 2024.The model provides an overview of households historical net cashflow by decile and age group by taking into consideration eight key metrics(see righthand side).W

79、e consider wage growth and CPI,housing costs,taxation,as well as current and announced government policies likely to impact households disposable income and net cashflow.This analysis allows for a more accurate depiction of the true household position.Source(s):Teneo research and analysis SpendingHo

80、usehold net cashflowis equal to:Necessity spendHousingDebt costsGross earningsGross incomeWage growthMandatory deductiblesIncome taxNational insuranceDisposable incomeOther expensesDiscretionary spendExpense inflationTeneos household net cashflow equation4 UK Economic and Consumer Forecas

81、tWhile real wages are rising and growth is expected to remain above inflation in 2024,households cash position will be below 2021 levels due to rising mortgage costs and income tax band freezes,which pushes households into higher tax brackets.23Source(s):ONS;Bank of England;Teneo research and analys

82、isNotes(s):1.Education,consumer debt and clothing spend omitted from graph,but included in total(to aid legibility);2.Median disposable income is after tax;3.ForecastHousehold net cashflow8,471 10,031 10,679 10,823 3,676 4,153 4,669 4,815 3,229 3,581 3,538 3,473 2,236 2,352 2,508 2,599 1,773 1,863 1

83、,962 2,021 1,414 1,551 1,692 1,749 1,139 1,166 1,259 1,285 520 538 585 611 24,180 27,095 28,881 29,500 05,00010,00015,00020,00025,00030,000Sep-21Sep-22Nov-23Jun-24September 2021September 2022November 2023June 2024Median disposable household income231,71833,58035,52136,6693Overall impact vs.September

84、 2021-(1,000)(900)(369)+1.1k(+3%)+1.9k(+6%)+1.9k(+6%)Spend categoryCAGR(21-24)Health5.5%Communication4.1%Restaurants&Hotels7.3%Misc.goods/services4.5%Recreation5.1%Transport2.5%Food&Beverage9.4%Housing8.5%With declining inflation forecasts,households are set to see real wage increases in 2024 vs.202

85、3SpendingHousehold net cashflowis equal to:Disposable incomeMedian household spending in,2021-2024eChange in median household spending12024 UK Economic and Consumer Forecast242023 saw higher income households facing the greatest amount of household cash pressure,and while lower-income households saw

86、 some relief,this was not enough to counteract the significant reduction seen across 2022.Source(s):ONS;Bank of England;Teneo research and analysis Note(s):1.Elevated mortgage payments are modelled into household expenditureChange in household cash positionHousehold inflationKeySpending growthChange

87、 in household cash positionHousehold inflation#%3.9%2.3%4.6%5.4%4.6%4.4%3.7%3.7%4.2%5.0%8.2%9.9%7.6%6.7%7.4%7.3%7.9%7.9%7.2%6.0%12.0%12.2%12.2%12.2%12.1%11.7%11.6%11.6%11.4%11.1%0%2%4%6%8%10%12%14%16%Lowest 10%10-20%20-30%30-40%40-50%50-60%60-70%70-80%80-90%Highest 10%8.4%9.7%6.9%7.2%7.1%6.6%5.5%5.3

88、%5.1%4.4%-1.9%-3.2%-0.3%-0.7%-0.5%-0.1%1.1%1.3%1.5%2.0%6.5%6.5%6.6%6.5%6.6%6.5%6.5%6.6%6.6%6.4%-4%-2%0%2%4%6%8%10%Lowest 10%10-20%20-30%30-40%40-50%50-60%60-70%70-80%80-90%Highest 10%Household inflation while higher income households were worse affected in 2023Initially,lower income households exper

89、ienced the greatest household inflation Spending growthSpending growthChange in household cash positionSpendingHousehold net cashflowis equal to:Disposable incomeIncome distribution by percentile2024 UK Economic and Consumer ForecastSpending growth and household inflation in 2021 2022Spending growth

90、 and household inflation in 2022 2023Income distribution by percentileHousehold net cashflow25Pressure on higher income households has been driven by increasing mortgage costs,with private mortgage holders seeing their housing costs increase by an avg.of 17%p.a.Key takeawaysRising interest rates hav

91、e significantly increased repayments for variable and expiring fixed rate mortgages,driving elevated household inflation.Mortgage holders typically occupy the higher tax brackets,adding additional pressure through reduced wage growth.Household net cashflowSocial housing renters remain less affected

92、due to capped annual price increases(typically CPI of the previous FY+1%),though steeper increases may be seen next year.4%6%17%4%0%2%4%6%8%10%12%14%16%18%Social Housing Private Rented Private owned(Mortgage)Private owned(no-mortgage)Total UK house-holds 14.1m5.2m9.0m10.1mHousehold inflation12.0%11.

93、1%11.2%10.4%5.8%7.2%8.0%9.6%17.7%18.3%19.2%20.1%0%5%10%15%20%Social HousingPrivate RentedPrivate Owned(no-mortgage)Private Owned(Mortgage)Source(s):ONS;Bank of England;Regulator of Social Housing;Teneo research and analysis SpendingHousehold net cashflowis equal to:Disposable incomeChange in househo

94、ld cash positionSpending growthChange percentage between Sept 2022 2023Change in monthly housing expenditureHousing type between Sept 2021 Nov 2023Change in median household inflation by housing type2024 UK Economic and Consumer ForecastPrivate Owned(mortgage)Private Owned(no-mortgage)Private Owned(

95、mortgage)2626Source(s):ONS;Bank of England;Teneo research and analysisNote(s):Absolute spend by those Older than 75 is lower than others but the proportion that they spend on food is the highest.Food has experienced a 30%inflation in the period and is driving inflation within this age group.Househol

96、d net cashflowThe level of exposure to inflationary pressures seems to be higher amongst the 30-49 year old demographic,largely due to rising mortgage costs and limited increases in disposable income.Household inflation10.4%10.2%11.7%12.3%12.3%7.7%8.9%7.1%6.7%7.9%18.1%19.0%18.7%19.0%20.2%0%5%10%15%2

97、0%Less than 3030-4950-6465-74Older than 7530-49 year olds faced the largest decline in cash position,driven by high housing mortgage costs,which dominated their spending and lower disposable income growth vs.other age groups.This is because they are typically among the highest earners,who experience

98、d lower gross wage growth coupled with their income being fully taxable and subject to higher tax rates.Change in household cash positionSpending growthKeySpending growthChange in household cash positionHousehold inflation#%Age group between Sept 2021 Nov 2023Change in household inflation by age gro

99、up2024 UK Economic and Consumer ForecastSpendingHousehold net cashflowis equal to:Disposable incomeDespite small increases in real wages,we expect consumer spending to be constrainedSection 05Despite the recovery in household incomes expected for 2024,we do not anticipate this to translate into sign

100、ificant increases in consumer spending.28DetailsFuture outlookMany households have accumulated debtUnsecured debt increased by c.7.5%YoY in 2023,with default rates spiking at the end of 2023 This trend is expected to continue in the medium term,with household unsecured debt forecasted to rise by 11%

101、in 2024,before reaching record levels in 2026 Consumer spending remained stronger than expected despite real wage declineRetail sales remain strong,driven by higher prices;however,we are observing falling volumesC.60%of adults are spending less on non-essentials;with real household incomes falling,n

102、o major improvement is expected in 2024Household real income remains below 2021 levelsDespite real wage growth,households cash position will be below 2021 levels due to rising mortgage costs and income tax band freezesAmid real wage growth,real household incomes are forecasted to grow,but will likel

103、y remain below 2021 levels until H2 2024 at the earliest 2024 elections will contribute to greater consumer uncertaintyThe cost-of-living crisis has significantly damaged consumer confidence;however,with inflation falling,the Jan 24 consumer confidence index reached levels not seen since Jan 22 Desp

104、ite this improvement,consumer confidence is expected to remain low due to uncertainty around elections,inflation,interest rates and geopoliticsMany private mortgage holders are still anticipating rate increasesIn 2023,average monthly mortgage repayments rose by c.60%for mortgages up for renewal,lead

105、ing to a reduction in spend of 50p for every 1 increase1Around 1.5m borrowers are due to come to the end of their fixed rate deal in 2024,with significant increases on their current rates expectedConsumer confidence remains lowSource(s):ONS;OBR;Bank of England;Guardian;TUC;Teneo research and analysi

106、sNote(s):1.Based on“How are households adjusting to rising mortgage costs?”insights as part of the biannual survey held by the Bank of England between 30th August and 19th September 2023What is likely to happen to spending in 2024?Upcoming elections may unsettle consumers due to potential policy dec

107、isions(e.g.Labour planning to charge VAT on private school fees)The Spring budget is expected to include tax cuts,potentially providing some respite for consumers While some increases in spending are expected,we do not expect this to be significantly above the levels observed in 20232024 UK Economic

108、 and Consumer Forecast29Source(s):KPMG;Teneo research and analysisNote(s):1.Survey based on 3,000 UK consumers from across UK regions and age and income groups were surveyed online by One Poll from December 1 to 11 2023.They consisted of:30%homeowner,mortgaged;31%homeowner,no mortgage;33%renter;6%li

109、ve with parents;14%with children,13%with pets;2.Reproportioned to exclude Prefer not to say category41%35%22%2%0%10%20%30%40%50%60%70%80%90%100%Financial security vs.202358%29%8%5%Cut spendingNo changeIncrease spendingNot sureConsumer spending and behaviour changesConsumers have indicated that they

110、expect to spend less on eating out,clothing and leisure travel,and the majority are feeling less secure financially as they enter 2024 vs.2023.Sense of financial security in 2024 vs.20231Expected level of spending vs.20241Level of savings going into 20241,2KeyLess securedNo changeMore secureNot sure

111、41%of consumers are feeling less secure in their finances as they enter 2024 compared to 202358%of consumers anticipate cutting their spending in 2024,planning to save on eating out,clothing,leisure travel and experiencesc.60%of consumers expect to enter 2024 with less than 3 months income savings,a

112、nd,of those,c.20%with no savings at all57%of consumers2024 UK Economic and Consumer Forecast30Alongside reductions in spending,we are beginning to see rising credit card defaults indicating that consumers are still repaying historical purchases and potentially postponing new purchases.KeyPast three

113、monthsNext three monthsCredit card default ratec.32%of UK credit card users always only pay the minimum amount.While this group generally has a low credit card limit,they are prone to getting into financial difficulty.Buy Now Pay Later(BNPL)use is rising,with c.48%of UK adults using it in 2023.Of th

114、ose who missed or made a late payment in the last 12 months,c.29%borrowed money to make repayments,generating further debt.Credit card users experience financial difficulty(60%)(40%)(20%)-20%40%60%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q42020202120222023H2 2023 saw an increase in credit card defaultsSource(s

115、):BoE;Teneo research and analysis2024 UK Economic and Consumer ForecastChange in%of total defaultsChange in credit card default rate(past/next 3 months)31Mortgage arrears are rising,highlighting the pressure some households are facing to keep up with repayments.Large increases in arrears across the

116、market may trigger upticks in repossessions.Source(s):BOE;FCA;Teneo research and analysisMortgage default rateThe number of mortgages in arrears is expected to increase by approximately 8%between Q124 and Q425.This is due to the growing number of homeowners that will need to refix their interest rat

117、e since the rate rises.Mortgage arrears will continue to rise with more homeowners needing to refix their rates.The Bank of England is expected to start reducing interest rates in 2024,causing the first lenders to reduce mortgage rates towards the end of 2023.For 2024,the rates are expected to drop

118、below 5%,but this is still significantly higher than the December 2021 average of 2.24%.KeyIn possessionIn arrears%of total number of loansArrears and repossessions on residential loans to individuals1.31.31.31.21.31.31.21.31.31.21.21.11.11.11.11.11.21.31.30.00.00.00.00.00.00.00.00.00.00.00.00.00.00

119、.00.00.00.00.01.41.31.31.31.31.31.31.31.31.21.21.21.11.11.11.21.21.31.40.00.20.40.60.81.01.21.41.6Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q32002220232024 UK Economic and Consumer ForecastWhat does this mean for H1 2024?Section 06-2.5%-2.0%-1.5%-1.0%-0.5%0.0%0.5%1.0%1.5%2.0%2021 Q32022 Q32023

120、Q32024 Q32025 Q3Pressure on household spending is impacting GDP,partly causing the technical recession in Q423.We expect low and stagnating growth to continue in 2024.33Teneo forecasted range KeyReal GDP quarterly growth 2021-2025DriverImpact on GDPMaterialityDescriptionConsumer spendingMAlthough co

121、nsumer spending has held up for longer than anticipated,we expect a fall in Q1 2024,thereafter remaining low throughout the yearHousehold cash positionMDespite a small increase in UK household financial positions,UK households will still be worse off than in 2021Housing market/HWith interest rates t

122、hought to have peaked and mortgage approvals on the rise,the housing market is expected to remain relatively flat,with predictions around-1.5 to 1%Chinese economy LChinas GDP growth,though still strong,slowed in 2023 with a similar outlook for 2024Investment outlookMBusinesses are shifting from a pe

123、riod of excess demand to one of excess supply with high costs of capital due to higher interest rates;business investment is set to fall in the near termSource(s):ONS;Teneo research and analysisGDP forecastTeneo forecast2024 UK Economic and Consumer Forecast 2024 Teneo.All rights reserved.This mater

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