New reports from Niesr and Rics highlight potential economic hurdles for the UK, including the need for increased taxes and the stagnation in the housing market, impacting long-term growth and investment.
The National Institute for Economic and Social Research (Niesr) has indicated that the UK’s next government may need to increase taxes due to restrictive fiscal rules that limit borrowing. In a report updated on May 9, 2024, Niesr suggested that these rules are currently hindering long-term investments essential for economic growth, impacting efforts towards achieving net zero emissions, and exacerbating regional disparities. The think tank forecasts modest GDP growth for 2024 and emphasizes the necessity for revising fiscal policies to support public investments and environmental goals.
Simultaneously, the UK housing market is experiencing a stagnation in buyer inquiries, primarily due to rising mortgage rates, according to a report from the Royal Institution of Chartered Surveyors (Rics). Despite a slight increase in available properties, particularly in London and southern England, there has been a notable decrease in momentum among potential buyers as of April 2024. The UK’s mortgage lending is expected to see only modest growth this year, with a more positive outlook projected for 2025, contingent upon decreasing inflation and favorable adjustments in interest rates.
Both reports underline the challenges facing the UK in terms of economic growth and public service funding, suggesting significant financial decisions are imminent irrespective of the general election outcomes. The analysis from Niesr identifies a potential necessity for post-election tax hikes to maintain service levels without compromising the fiscal stability.
