The bank rate is currently at its highest level since 2008 as the Bank of England warns of difficult times ahead, yet there are already indications of a slowing economy.
Just one day after the Bank of England warned of a 15-month recession, there are indications in property and hiring that the downturn has already begun.
House prices declined in July (in monthly terms) for the first time in more than a year, and the market is expected to fall further as a result of the bank’s decision to raise interest rates from 1.25 percent to 1.75 percent.
The bank rate is currently at its highest level since 2008 as the bank attempts to combat inflation, which is already running at 9.4 percent – considerably above its 2 percent objective – and is expected to surpass 13 percent later this year.
Mortgage lender Halifax stated that this fast escalating cost of living would have an impact on the market as purchasers seek to reduce expenditure.
In July, the average house price was £293,221 – a decrease of £365, or 0.1%, from the previous month’s record high. However, prices increased by 11.8 percent on an annual basis, compared to 12.5 percent in June.
Russell Galley, the managing director of Halifax, stated, “House prices are anticipated to come under further pressure as market tailwinds continue to wane and the headwinds of rising interest rates and growing living expenses gain a firmer grip.”
Therefore, a slowing of annual house price inflation remains the most probable outcome.
June saw the lowest number of new mortgage approvals in two years, according to figures from the Bank of England.
The dismal outlook is also causing businesses to hire fewer employees as they grow more cautious.
According to a research of 400 recruiters conducted by the Recruitment and Employment Confederation and KPMG, businesses are “justifiably cautious” about their hiring intentions due to rising energy prices and inflation.
KPMG’s Claire Warnes stated, “The pattern of uncertainty in the British labor market over the past few months continues, as hiring activity slowed further in July.”
Employers’ reluctance to hire is warranted by the bleak economic outlook; nonetheless, a dearth of qualified candidates and an overall skills shortage in most industries are keeping starting pay high.
The deputy chief executive of the REC, Kate Shoesmith, stated, “The labor market remains robust. As it has since early 2021, demand for personnel continues to increase across all industries.
“As starting salaries continue to rise, this is an excellent moment for job searchers to explore their next position.
However, permanent hiring growth has slowed in recent months. We have observed that growing fuel and energy costs, inflation, and labor shortages hurt employer confidence.
“Labor and skill shortages are also limiting commercial and public sector opportunities to meet consumer demand.”
In the preceding week, the closely monitored PMI surveys also revealed signs of a slowdown in the services, manufacturing, and construction industries.
As Conservative Party members prepare to vote between Rishi Sunak and Liz Truss for the position, all of this poses a formidable challenge to the next prime minister.
