Weekly Policy Report 30 January – 3 February 2023 

Onwards and upwards? January has faded into February, one month closer to spring, and one month closer to the Spring Budget statement.

Businesses seem to be feeling marginally happier, or perhaps marginally less concerned, about the state of the economy. Brexit’s biggest brainteaser is showing signs of easing. The Bank of England is saying the UK’s recession could be shorter than expected. What could possibly go wrong? It certainly has been a striking start to February…

Upwards march – Our Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, rose to -28 in January 2023, from a near-record low of -58 in December.  This is the most positive level recorded since Russia’s invasion of Ukraine pushed the index down to -33 in March last year. Read our analysis here.

A spring in our steps – As the Chancellor prepares his Spring Budget, we submitted some recommendations we feel he might like to consider. The last budget didn’t go down particularly well. So this time we are hoping the Chancellor will present a sustainable plan for growth that stretches beyond the economic challenges we are facing in the short term. Our full submission can be found here.

Our paper on paperwork – It has been three years now since the UK officially left the European Union. Time flies, but it’s debateable as to whether we can attribute that to fun… One area where we would like to see some change is regulation. We have offered some ideas for how to fix the issue of what to do about post-Brexit regulation. You can read them here.

Peaking interest – The Bank of England Monetary Policy Committee voted to raise interest rates by 0.5% to 4% in order to get inflation under control. The current rate of annual CPI inflation is 10.5%, and three quarters of our members believe this is yet to peak. Here is our full analysis.

Deal or no deal? – There is continued optimism that a solution to the Northern Ireland problem may be found soon. While nothing has been formally agreed yet, both UK and EU leaders are saying talks have been constructive, and are focused on reducing friction to trade between Great Britain and Northern Ireland. We liked the analysis here.

Next week watch out for…

Monday 6 February

  • IoD members can tune into our quarterly Economic Update webinar with our Chief Economist and the Bank of England from 12-1pm. More details here.

Tuesday 7 February

  • Chancellor Jeremy Hunt will take oral questions in the House of Commons

Wednesday 8 February

  • Prime Minister’s Questions at midday

Friday 10 February

  • ONS will publish monthly GDP statistics for December 2022
  • ONS will publish UK trade statistics for December 2022
  • Our February Policy Voice survey will go live. Look out for it in your inboxes!

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