The key economic graphs that define 2023
How to sum up a year like 2023?
Perhaps the best thing to say is that it was considerably less exciting – as far as the economics went – than 2022.
And that’s probably no bad thing, because in 2022 much of what passed for excitement was extremely painful: the onset of a cost of living crisis which caused the biggest fall in British standards of living in modern record, a financial meltdown in the wake of Liz Truss‘s mini-budget.
The plan, when Rishi Sunak and Jeremy Hunt came into office, was always to make the economy boring again, and to some extent they succeeded.
Most obviously, while the government’s cost of borrowing did later rise to above the Truss era levels, it was largely down to higher inflation expectations and not to fears over the credibility of UK government policy.
This time last year, most people assumed – present company included – that 2023 would be a year of recession for the UK.
And for much of the year that’s precisely what it looked like.
France and Germany both tipped into technical recession (the definition of which is that you suffer two successive quarters of economic contraction). The UK was expected to do likewise.
Economic growth
But somehow, it never happened.
At least, not quite.
Instead, the economy more or less flatlined for most of the year – though figures published by the Office for National Statistics just before Christmas showed the economy contracted slightly, by 0.1% in the third quarter.
Either way, this can hardly be held up as a positive result. Normally you’d expect the UK’s gross domestic product to grow by around 2-2.5% each year.
However, a negligible amount of economic growth is more than most expected this year – even if (see below) it was helped by a colossal increase in migration.
Technically, this meant the prime minister met one of his much-publicised pledges he made to the country at the start of the year – to grow the economy.
As you can see from the chart, this isn’t much to boast about, especially set against the pre-pandemic path, but it is certainly better than what many other European countries experienced.
The Cost of Living
Another of the prime minister’s pledges was to halve inflation this year.
At the time he made it, this pledge looked pretty unspectacular, given a) controlling inflation is the Bank of England‘s task, not the government’s and, anyway, b) pretty much every economist was expecting inflation to halve this year anyway.
But over the course of the year inflation defied many of those economists’ forecasts, with the upshot that by the summer that pledge looked quite risky.
But then, no sooner had inflation surprised on the upside, it surprised on the downside, falling faster than most economists expected.
By the end of the year the consumer price index rate of inflation was down to 3.9% which is nearly in “normal” territory, albeit considerably higher than the Bank of England’s 2% target.
But while that meant the rate was indeed halved (actually more than halved) over the year, this hardly ends the cost of living crisis.
After all, inflation is simply the rate at which prices are changing each year. And right now prices are still 15% higher than they were a couple of years ago.
It’s that jump in levels which is causing severe economic hardship right now.
Life is not getting any less expensive. It’s just getting expensive a little slower than it was a year or so ago.
Interest rates
It’s tempting to lump interest rates along with the other things that didn’t turn out as bad as expected, but here the story is more complicated.
True: rates never rose to the 6% highs that were once expected around the time of the Truss mini-budget and also during the inflation spike during the Hunt chancellorship.
But they nonetheless rose far higher than most had expected at the start of the year, up to a peak of 5.25%. As the year ended, the Bank was still insisting that they would stay up there for some time (and some members were still voting for higher rates) but most investors believe they will be cut numerous times in the new year – down as far as 4% by the end of the year.
That has a bearing on the mortgage rates most of us pay, since fixed-rate mortgages are mostly priced off what’s going on in financial markets rather than the Bank’s official rate. The upshot was that the going rate for two and five-year fixed-rate mortgages were falling sharply by the end of the year.
Tax burden
Another hot topic this year was taxation.
The government insisted repeatedly that it wants to bring it down, and in the Autumn Statement, the chancellor announced a series of cuts to both workers’ taxes and taxes on business investment.
The upshot was that the tax burden wasn’t due to rise as high as it might otherwise have done.
However, the overall burden is still due to hit the highest level since the 1940s, in large part because of the fact that the levels at which people are pulled into higher tax bands has been frozen.
Higher wage inflation (due to the cost of living crisis) means more people are seeing their earnings taxed at those higher levels.
This so-called “fiscal drag” means the nation is shifting from being a medium-tax country to a high-tax country.
But so too are most developed nations, as the cost of running expensive healthcare systems rises, along with the average age of their populations.
Migration
While the government spent much of its energy talking about illegal immigration and the boats coming across the channel, the real quantitative story here was actually legal migration, which rose, according to the data released this year, to an unprecedented level of 745,000 in 2022.
That rise was extraordinary by any standards.
When looked at as a share of the population, it amounts to comfortably the biggest rise in net migration since records began. And, strikingly, experts said that this was primarily a consequence of the new rules brought in after Brexit, which made it easier for workers and students from outside Europe to come to Britain.
Migration might have been a big issue during the EU referendum, but the numbers today are considerably higher than they were back then – but Britain has swapped EU migrants with those from outside the continent – primarily from India and China.
Politics
Planning reforms to ‘rewire the system’ and get Britain building – all while protecting wildlife
Kentucky’s finance watchdog has dismissed its lawsuit against Coinbase over the exchange’s staking rewards program, following its peers in Vermont and South Carolina.
Kentucky’s Department of Financial Institutions filed the stipulation to dismiss jointly with Coinbase on April 1, ending the state’s legal action against the exchange first filed along with 10 other state regulators in June 2023.
Coinbase chief legal officer Paul Grewal posted to X on April 1, calling for Congress “to end this litigation-driven, state-by-state approach with a federal market structure law.”
Source: Paul Grewal
Financial regulators from 10 states launched similar suits against Coinbase in June 2023, on the same day the Securities and Exchange Commission sued the exchange — a lawsuit the SEC dropped last month.
Seven suits against Coinbase still active
Alabama, California, Illinois, Maryland, New Jersey, Washington and Wisconsin are the seven states that are still continuing with their lawsuits, which all allege Coinbase breached securities laws with its staking rewards program.
Vermont was the first state to end its suit against Coinbase, with its Department of Financial Regulation filing an order to rescind the action on March 13, noting the SEC’s Feb. 27 decision to drop its action against the exchange and the likelihood of changes in the federal regulator’s guidance.
The South Carolina Attorney General’s securities division followed Vermont days later, dismissing its lawsuit in a joint stipulation with Coinbase on March 27.
Related: South Carolina dismisses its staking lawsuit against Coinbase, joining Vermont
Kentucky’s decision to drop its case against Coinbase follows just days after the state’s governor, Andy Beshear, signed a “Bitcoin Rights” bill into law on March 24 that establishes protections for crypto self-custody and exempts crypto mining from money transmitting and securities laws.
The axed state-level lawsuits come amid a stark policy change at the SEC, which has dropped or delayed multiple lawsuits against crypto companies that it filed under the Biden administration.
The federal securities watchdog has also created a Crypto Task Force that is engaging with the industry on how it should approach cryptocurrencies.
Magazine: SEC’s U-turn on crypto leaves key questions unanswered
Politics
Sir Keir Starmer says US-UK trade talks ‘well advanced’ and rejects ‘knee-jerk’ response to Donald Trump tariffs
Sir Keir Starmer has said US-UK trade talks are “well advanced” ahead of tariffs expected to be imposed by Donald Trump on the UK this week – but rejected a “knee-jerk” response.
Speaking to Sky News political editor Beth Rigby, the prime minister said the UK is “working hard on an economic deal” with the US and said “rapid progress” has been made on it ahead of tariffs expected to be imposed on Wednesday.
But, he admitted: “Look, the likelihood is there will be tariffs. Nobody welcomes that, nobody wants a trade war.
“But I have to act in the national interest and that means all options have to remain on the table.”
Politics latest: Ministers hail ‘huge’ minimum wage boost as bills rise
Sir Keir added: “We are discussing economic deals. We’re well advanced.
“These would normally take months or years, and in a matter of weeks, we’ve got well advanced in those discussions, so I think that a calm approach, a collected approach, not a knee-jerk approach, is what’s needed in the best interests of our country.”
Downing Street said on Monday the UK is expecting to be hit by new US tariffs on Wednesday – branded “liberation day” by the US president – as a deal to exempt British goods would not be reached in time.
A 25% levy on car and car parts had already been announced but the new tariffs are expected to cover all exports to the US.
Jonathan Reynolds, the business and trade secretary, earlier told Sky News he is “hopeful” the tariffs can be reversed soon.
But he warned: “The longer we don’t have a potential resolution, the more we will have to consider our own position in relation to [tariffs], precluding retaliatory tariffs.”
He added the government was taking a “calm-headed” approach in the hope a deal can be agreed but said it is only “reasonable” retaliatory tariffs are an option, echoing Sir Keir’s sentiments over the weekend.
Read more:
Why a figure of 48% is important as Trump tariffs near
Starmer and Trump discuss US-UK ‘prosperity’ deal
Donald Trump speaks to reporters aboard Air Force One on Sunday. Pic: Reuters
Tariff announcement on Wednesday
Mr Trump has been threatening tariffs – import taxes – on countries with the biggest trade imbalances with the US.
However, over the weekend, he suggested the tariffs would hit all countries, but did not name them or reveal which industries would be targeted.
Read more: How Trump’s tariffs could affect the UK
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‘Everything on table over US tariffs’
Mr Trump will unveil his tariff plan on Wednesday afternoon at the first Rose Garden news conference of his second term, the White House press secretary said.
“Wednesday, it will be Liberation Day in America, as President Trump has so proudly dubbed it,” Karoline Leavitt said.
“The president will be announcing a tariff plan that will roll back the unfair trade practices that have been ripping off our country for decades. He’s doing this in the best interest of the American worker.”
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Trump’s tariffs: What can we expect?
Tariffs would cut UK economy by 1%
UK government forecaster the Office for Budget Responsibility (OBR) said a 20 percentage point increase in tariffs on UK goods and services would cut the size of the British economy by 1% and force tax rises this autumn.
Global markets remained flat or down on Monday in anticipation of the tariffs, with the FTSE 100 stock exchange trading about 1.3% lower on Monday, closing with a 0.9% loss.
On Wall Street, the S&P 500 rose 0.6% after a volatile day which saw it down as much as 1.7% in the morning.
However, the FTSE 100 is expected to open about 0.4% higher on Tuesday, while Asian markets also steadied, with Tokyo’s Nikkei 225 broadly unchanged after a 4% slump yesterday.
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