'Outcry' for rate and tax cuts would only be a 'short-term fix' to UK growth issues

investmentweek.co.uk:

'What is required from our leaders are some genuine policies to be able to generate sustainable growth, which benefits the wider economy. Failing which, the image of the mammoth stuck in the La Brea Tar Pits creates the perfect analogy.'

According to data from the Office for National Statistics published today (15 February), the UK fell into a technical recession at the end of 2023, after the economy shrank by 0.3% in the final three months of the year.

UK enters technical recession as economy shrinks 0.3% in Q4 2023

The overall GDP growth was the weakest change in real GDP since the financial crisis, up just 0.1% versus the previous year.

Abhi Chatterjee, chief investment strategist at Dynamic Planner, said the recession was «confirmation of the fact that high interest rates are starting to affect the entire economy».

He said the onus for solving the UK's stalling economic growth now fell «firmly with the incumbent government» and the Bank of England to come up with policies that help the economy grow. But he argued that a spree of reactionary rate cuts would not be a suitable long-term solution.

«While there may be general outcry for rate and tax cuts to help boost consumer expenditure and help beleaguered corporates, that could be a short-term fix,» Chatterjee said.

«What is required from our leaders are some genuine policies to be able to generate sustainable growth, which benefits the wider economy. Failing which, the image of the mammoth stuck in the La Brea Tar Pits creates the perfect analogy».

'More questions than answers' as inflation remains unchanged at 4%

Charles Hepworth, investment director at GAM Investments, agreed, adding that hopes for the BoE to «hit the emergency rate cutting pedal, however, may