Key findings (1)
The report comprises six sections. The key points from each section are set out below.
1. Macroeconomic context ▪ The surge in energy prices over 2022 has largely reversed. With headline CPI at 2.2% in July and signs of a looser labour market, the Bank of England cut interest rates from 5.25% to 5.00% in August. We expect headline inflation to fall below the 2.0%-target next year, as spare capacity in the economy and a looser labour market help to bring down services inflation. This should allow the Bank to cut the policy rate further, to 4.50% by the end of 2024 and to 3.00% by the end of 2025 ▪ The UK economy fell into a mild recession at the end of last year, but the recovery has already begun. Lower inflation and further cuts to interest rates should help to support economic activity. We expect real GDP to average 1.2% in 2024 and a stronger 1.5% in 2025 and 2026 ▪ An AI-fuelled boost to productivity should enable real GDP to grow by an average of 1.7% per year over the next decade. That is stronger than the 1.2% average per year seen over 2007-2019 2. Policy context ▪ Two key pillars of the new Labour government’s policy agenda are to ‘Get Britain building again’ and to ‘Make Britain a clean energy superpower’ ▪ The government has set a target of delivering 1.5 million net additional dwellings in England over the course of the parliament, with an overhaul of the planning system, through the Planning and Infrastructure Bill, used as a lever to stimulate housebuilding ▪ Net zero is a key priority for the new government; the warm homes plan includes a commitment for an extra £6.6 billion over the parliament to improve energy efficiency of the housing stock and a commitment to ensure all homes in the private rented sector meet minimum energy efficiency standards by 2030
▪ Bringing the entire housing stock up to EPC rating C would save households a total of £8.8 billion annually
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