UK Elections: Economy

Facts

• Overview: The UK is the world's sixth largest economy in terms of nominal GDP and fourteenth largest by purchasing power parity. The service sector accounts for 81% of economic output, with the financial sector playing a particularly important role. The government's economic policy is developed by His Majesty's Treasury, while the Bank of England (BoE) is responsible for setting interest rates, quantitative easing, etc.¹
• Overview: The UK is the world's sixth largest economy in terms of nominal GDP and fourteenth largest by purchasing power parity. The service sector accounts for 81% of economic output, with the financial sector playing a particularly important role. The government's economic policy is developed by His Majesty's Treasury, while the Bank of England (BoE) is responsible for setting interest rates, quantitative easing, etc.²
• Overview: The UK is the world's sixth largest economy in terms of nominal GDP and fourteenth largest by purchasing power parity. The service sector accounts for 81% of economic output, with the financial sector playing a particularly important role. The government's economic policy is developed by His Majesty's Treasury, while the Bank of England (BoE) is responsible for setting interest rates, quantitative easing, etc.³
• Overview: The UK is the world's sixth largest economy in terms of nominal GDP and fourteenth largest by purchasing power parity. The service sector accounts for 81% of economic output, with the financial sector playing a particularly important role. The government's economic policy is developed by His Majesty's Treasury, while the Bank of England (BoE) is responsible for setting interest rates, quantitative easing, etc.⁴
• Overview: The UK is the world's sixth largest economy in terms of nominal GDP and fourteenth largest by purchasing power parity. The service sector accounts for 81% of economic output, with the financial sector playing a particularly important role. The government's economic policy is developed by His Majesty's Treasury, while the Bank of England (BoE) is responsible for setting interest rates, quantitative easing, etc.⁵
• Economic growth: According to the Organisation for Economic Co-operation and Development (OECD), the UK economy has recovered to pre-pandemic levels following the immediate effects of COVID and Brexit. It places fifth (at 1.7%) out of the six G7 members with available data for GDP growth between 2019 Q4 (pre-pandemic) and 2024 Q1. In 2024 Q1, UK real GDP grew by 0.6%, having entered a technical recession during the last two quarters of 2023. While the OECD predicts UK GDP will grow 0.4% and 1.0% in 2024 and 2025, respectively, ranking joint sixth and seventh out of G7 nations, the International Monetary Fund (IMF) predicts the UK will grow instead by 0.5% and 1.5%, placing sixth and third.⁶
• Economic growth: According to the Organisation for Economic Co-operation and Development (OECD), the UK economy has recovered to pre-pandemic levels following the immediate effects of COVID and Brexit. It places fifth (at 1.7%) out of the six G7 members with available data for GDP growth between 2019 Q4 (pre-pandemic) and 2024 Q1. In 2024 Q1, UK real GDP grew by 0.6%, having entered a technical recession during the last two quarters of 2023. While the OECD predicts UK GDP will grow 0.4% and 1.0% in 2024 and 2025, respectively, ranking joint sixth and seventh out of G7 nations, the International Monetary Fund (IMF) predicts the UK will grow instead by 0.5% and 1.5%, placing sixth and third.⁷
• Economic growth: According to the Organisation for Economic Co-operation and Development (OECD), the UK economy has recovered to pre-pandemic levels following the immediate effects of COVID and Brexit. It places fifth (at 1.7%) out of the six G7 members with available data for GDP growth between 2019 Q4 (pre-pandemic) and 2024 Q1. In 2024 Q1, UK real GDP grew by 0.6%, having entered a technical recession during the last two quarters of 2023. While the OECD predicts UK GDP will grow 0.4% and 1.0% in 2024 and 2025, respectively, ranking joint sixth and seventh out of G7 nations, the International Monetary Fund (IMF) predicts the UK will grow instead by 0.5% and 1.5%, placing sixth and third.⁸
• Economic growth: According to the Organisation for Economic Co-operation and Development (OECD), the UK economy has recovered to pre-pandemic levels following the immediate effects of COVID and Brexit. It places fifth (at 1.7%) out of the six G7 members with available data for GDP growth between 2019 Q4 (pre-pandemic) and 2024 Q1. In 2024 Q1, UK real GDP grew by 0.6%, having entered a technical recession during the last two quarters of 2023. While the OECD predicts UK GDP will grow 0.4% and 1.0% in 2024 and 2025, respectively, ranking joint sixth and seventh out of G7 nations, the International Monetary Fund (IMF) predicts the UK will grow instead by 0.5% and 1.5%, placing sixth and third.⁹
• Inflation and interest rates: Following annual consumer price index (CPI) inflation peaking at 11.1% in October 2022 — its highest rate in over 40 years — the statistic now sits at the target 2% as of May 2024. In order to address rising inflation, the BoE raised interest rates 14 times from December 2021 to current levels of 5.25% — a 15-year high. The BoE projects that in Q2 2025, CPI inflation will sit at 2.6% with interest rates at 4.5%, while in Q2 2027 CPI inflation and interest rates will both fall to 1.6% and 3.75%, respectively.¹⁰
• Inflation and interest rates: Following annual consumer price index (CPI) inflation peaking at 11.1% in October 2022 — its highest rate in over 40 years — the statistic now sits at the target 2% as of May 2024. In order to address rising inflation, the BoE raised interest rates 14 times from December 2021 to current levels of 5.25% — a 15-year high. The BoE projects that in Q2 2025, CPI inflation will sit at 2.6% with interest rates at 4.5%, while in Q2 2027 CPI inflation and interest rates will both fall to 1.6% and 3.75%, respectively.¹¹
• The economy as an election issue: YouGov has found that, as of June 24, 54% see the economy as the most important issue facing the country. In comparison, according to the June 2024 Ipsos Issues Index, 29% and 33% of UK adults see inflation and the economy as important issues. This figure rises to 38% among Labour voters and 37% among Conservatives when considering the economy, and goes to 30% and 24% when considering inflation.¹²
• The economy as an election issue: YouGov has found that, as of June 24, 54% see the economy as the most important issue facing the country. In comparison, according to the June 2024 Ipsos Issues Index, 29% and 33% of UK adults see inflation and the economy as important issues. This figure rises to 38% among Labour voters and 37% among Conservatives when considering the economy, and goes to 30% and 24% when considering inflation.¹³
• Conservative Party pledges: Within their manifesto, the Conservatives have committed to a further two percentage point decrease in National Insurance (NI) to 6% by April 2027, having already cut the tax by four percentage points from 12% this year. They've also promised to abolish the main rate of self-employed NI entirely by the end of the next parliamentary term, while pledging to not raise corporation tax, income tax, capital gains tax, and VAT. Tax cuts will be funded, amongst other measures, by a £12B ($15B) reduction in welfare spending. The party's manifesto costings document claims that manifesto policies will cost approximately £1B ($1.3B) in 2025-26, while reducing the overall cost of borrowing in the period up to 2029-30 by over £2B ($2.6B).¹⁴
• Labour Party pledges: Labour claims that it will 'kickstart economic growth' and is the party of 'wealth creation.' Within its manifesto, corporation tax, income tax, NI, and VAT are pledged to remain the same. Within the party's costings, public service policies — such as 40K new NHS appointments every week, 700K new yearly dental appointments, 6.5K new teachers, and HMRC investment — will cost £4.8B, while £7.4B will be raised from measures such as applying VAT to private schools, closing tax loopholes, abolishing the non-dom tax status, increasing stamp duty for non-UK residents by 1%, and reducing tax avoidance. Prospective government spending for Great British Energy, the National Wealth Fund, British Jobs Bonus, and the party's Warm Homes plan will cost £4.7B, and will be funded by £3.5B in borrowing and £1.2B in windfall taxes on oil and gas companies.¹⁵
• Reform UK pledges: Reform claim that, if elected, within their first 100 days they will make “critical” changes to the UK economy. These include raising the starting point for income tax to £20K ($25K), removing VAT from energy bills, and lowering fuel duty by 20p (25c) per liter. The party has also committed to removing stamp duty for houses below £750K ($950K), as well as inheritance tax for all estates under £2M. Foreign aid will be reduced by 50%, while the BoE will be ordered to save £30B-40B a year ($38B-$51B) by stopping the payment of interest on quantitative easing reserves to commercial banks. Corporation tax will be reduced from 25% to 15% over five years, while the minimum profit threshold will be raised to £100K ($165K).¹⁶
• Liberal Democrats pledges: The Lib Dems pledge 'long-term help' with the cost of living through an emergency Home Energy Upgrade program and a National Food Strategy. They will invest in green energy to boost economic growth and create jobs, while imposing a one-off windfall tax on oil and gas companies. The Digital Services Tax for tech giants will increase from 2% to 6%, Bank Surcharge and Bank Levy revenues will return to 2016 levels, capital gains tax will be reformed, and a 4% tax on share buybacks for FTSE 100 companies will be introduced. Income tax will be cut by raising the tax-free personal allowance. They also promise to fix the UK’s relationship with the EU by creating a 'new comprehensive agreement' to reduce trade barriers.¹⁷

Sources: ¹datacatalog.worldbank.org, ²theOECD, ³Commonslibrary, ⁴HM Treasury Careers, ⁵Bankofengland, ⁶oecd.org, ⁷Researchbriefings, ⁸ONS (a), ⁹IMF, ¹⁰bankofengland.com, ¹¹ONS (b), ¹²yougov.co.uk, ¹³Ipsos, ¹⁴public.conservatives.com, ¹⁵labour.org.uk, ¹⁶assets.nationbuilder.com and ¹⁷Libdems.

Narratives

• Tory narrative, as provided by The Sun. Following a tough couple of years, the UK economy is now beginning to reap the rewards of strong and stable governance. The fastest growth in two years and tumbling inflation is by no means an accident — the British public can remain optimistic about the future of their country under the lead of the Conservative Party.
• Labour narrative, as provided by The Mirror. The Tories have destroyed the economy. Amidst doubling national debt and skyrocketing mortgages, Sunak has called an election earlier than expected because he knows his policies have failed. With no more room for tax cuts in the second half of the year, the prime minister has finally resigned his fate to the British public.
• Reform narrative, as provided by GB News. Polling shows that the British people neither trust Labour nor the Conservatives with being responsible for lowering taxes and managing the UK economy. The public is resigned and pessimistic over the direction of the country — irrespective of whether Reeves or Hunt holds the keys to the Treasury.
• Progressive narrative, as provided by Socialist Worker. UK capitalism has never recovered from 2008, leaving the average individual nearly £15K ($19K) worse off than they should be. Following historic decline, the Tories cannot be trusted with another five years in power, and it's clear that the change the country needs will not be found in Starmer. Now is more important than ever for people to come together and fight the pro-austerity, anti-worker norms that continue to hold the UK hostage.

Predictions