UK Economic Outlook: The Macroeconomic Outlook for the United Kingdom

The United Kingdom continues to suffer a 'terms of trade' shock where the cost of our imports – food and energy in particular – has risen relative to the value of our exports. Such a shock requires a fall in real income for the economy, which means a period of high inflation and below trend growth. The job of policymakers is to engineer this adjustment to a lower real income level without bringing about a recession and the job losses, household and corporate defaults, house price falls and financial market turmoil that comes with it. Unfortunately, in the three months between our Summer and Autumn Outlooks, rather than policy aimed at achieving this smooth transition, we have experienced a period of political and economic turmoil. At the time of our Summer Outlook, we found ourselves in an interregnum between Prime Minister Boris Johnson, who resigned on 7 July and Liz Truss, who was formally appointed as Prime Minister on 6 September. After 44 days in office – the shortest tenure of any Prime Minister in history – Liz Truss resigned, to be replaced within a week by Rishi Sunak. Over this period, we have also had three different Chancellors of the Exchequer: Nadhim Zahawi, Kwasi Kwarteng and Jeremy Hunt.