Reasons to be cheerful says respected economist

The government posted an unexpected budget surplus last month, with highest self-assessment income tax receipts since records began in 1999, a third higher than last January.

Public sector net borrowing in January was in surplus by £5.4 billion – a £7.1 billion smaller surplus than in January 2022 but a £5 billion larger surplus than forecast by the Office for Budget Responsibility.

In the financial year-to-January 2023, the public sector borrowed £116.9 billion – £7 billion more than in the same period last year but £30.6 billion less than forecast by the OBR.

The UK isn’t out of the woods yet, but there are certainly reasons to be cheerful.

At a breakfast economic briefing put on in Cheltenham by financial advisers Mushroombiz, respected British economist Vicky Pryce said that while uncertainty remains on the state of the global economy, UK SMEs are more upbeat about their 2023 prospects, despite the continuing uncertain economic outlook.

She cited the Barclays SME Barometer, published today, which revealed that 41 per cent of SMEs reported feeling optimistic about their own business prospects – the highest level in 9 months and more than half (55 per cent) of SMEs expect their business to grow this quarter, compared to the same period last year.

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Vicky said: “We all expected the worst. That’s not happened so we are all more optimistic because things aren’t as bad as we thought they were going to be.

“Inflation isn’t as bad as feared, and we found alternative sources of supply this winter after we stopped buying so much oil and diesel from Russia.

“International food prices have also been coming down over the last 10 months, in fact they are down to 2021 levels – although that’s not yet reflected in the UK supermarkets.”

Vicky acknowledged that the squeeze on UK incomes is likely to continue for a while, but pointed out that this hasn’t stopped some people spending.

“Retail sales were up in January by 1.4 per cent, which economists didn’t predict, although they are down more than five per cent on last year.”

The money we spend on eating and drinking out has also risen by 20 per cent, and travel is up an incredible 60 per cent, she added.

“With £200 billion of savings accumulated over Covid, some people have money to spend,” she added.

However, it’s not all rosey. Despite the supply chain difficulties easing, the economy is not out of the deep end yet and insolvencies, especially amount SMEs, are rising.

“What makes the economy work is entrepreneurship,” she said. And entrepreneurship is something that the UK does well. There were more than 753,000 new start-ups founded in the UK between March 2021 and March 2022. Fintech is the most successful start-up sector in the UK, with 1,400 fintech sectors showing high growth, and 25 British start-ups became unicorns in 2021 according to research company Beauhurst.

“There is more optimism around.”

Mushroombiz also revealed the results of their UK-wide survey of more than 4,000 people which showed that despite a six per cent drop in confidence in the UK's economy prospects, the number of people planning to start a business in the next year are ticked upwards (albeit by just one per cent).

A lack of money and spare time are the two primary factors preventing respondents from starting a business. Nearly a quarter indicated they would start a business if they had more money.

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