More issues: Pedestrians near an apartment block under construction in London. If unemployment remains low, people will continue spending even in the face of a cost-of-living squeeze, and the housing market won’t see many forced sellers. — Bloomberg
LONDON: We come to the end of yet another “unprecedented” year. The UK had three prime ministers, grieved its longest-reigning monarch and watched as energy and food bills soared in the wake of the Russian invasion of Ukraine.
Trying to predict what happens next year might therefore sound like a mug’s game, but brave editors and reporters from across Bloomberg UK’s newsroom have taken a crack at it. From the big issues facing Rishi Sunak to Cornish lobster, our experts below cast their predictions for what’s coming in the year ahead.
And, if you want to see how well last year’s predictions fared before going onto this year’s, we have that covered, too.
Here are our predictions for 2023. A version of this first appeared in The Readout with Allegra Stratton.
Energy
“European governments will struggle to maintain the same level of energy subsidies as they did in 2022, which perversely may mean that even if wholesale prices drop, retail prices may remain as high, or even higher, in 2023 than in 2022,” said Javier Blas of Bloomberg Opinion.
”I’ve been surprised at how long it took the UK government to take the energy crisis seriously. Help only started for households in October and will be scaled back in April meaning higher bills.
“It’s hard to see the situation improving by next winter – Europe is already bracing for at least another year of high prices, and it’s not clear how the Prime Minister plans to deal with this in Britain,” said Rachel Morison, team leader for gas, power and renewables in Europe
“While Christmas won’t be as bad as expected, next year could be much worse.
“Heating bills will land in January alongside credit card bills, while mortgage costs will intensify. Unless inflation starts to come down, I would not be surprised to see a sharp contraction in spending as the year progresses. It could be reminiscent of 2011, when value-added tarose, and spending fell off of a cliff,” said Andrea Felsted of Bloomberg Opinion.Politics
“After such a turbulent year, it now feels like a return to boring day-to-day politics, pitting two intelligent, details-driven technocrats against each other in Rishi Sunak and Keir Starmer.
“After re-establishing Labour closer to the centre ground of British politics, Starmer’s challenge in 2023 is to come up with some policies that proves the opposition party truly is electable again.
“Sunak’s in-tray includes finally resolving the impasse with the European Union over post-Brexit trading arrangements in Northern Ireland, dealing with a restless workforce that’s increasingly resorting to strike action as pay fails to keep pace with rampant inflation, and helming the nation through a looming recession.
“And much like Starmer, he has to prove that his hopelessly divided Conservative Party is electable again in time for an election that’s widely expected in 2024 and has to be held in January 2025 at the latest,” said Alex Morales, UK politics editor.
”Next year there are big questions facing Rishi Sunak. The consensus appears to be no election until 2024, but that leaves him limping on with little prospect of building momentum through some dark economic days,” he said.Economy
“Two things I’m watching with interest next year will be Keir Starmer and the London housing market.
“With a 20-point lead in the opinion polls, and the Tory government on its last legs, it’s going to take a monumental collapse for Starmer not to be the UK’s next leader. So how does he play that? At the start of this year, he was being talked about as more of a Neil Kinnock figure than a Tony Blair, a figure to set the party straight after the damage created by a left wing predecessor.
“Now he’s prime minister-in-waiting. But there are still lots of questions over how he gets from here to election day. How will he approach the budget deficit? How will he react to the Tories stealing his policies? And most of all, how will he avoid screwing it up? I’m betting there will be one major wobble but he’ll get there in the end.
“The London housing market has been a one-way bet for as long as I can remember. Even after the financial crisis, it barely paused for breath while the rest of the world retrenched. But now it faces a unique set of challenges, it’s not just rising interest rates and recession, but the waning power of the City and the problems facing the rich Russian who drove so much of the higher end,” he added.
Ben Sills, managing editor for European economy and government Bloomberg Economics said prices could drop 20%.
“I struggle to see it – the British establishment is just too invested in keeping the show on the road – but I would expect some increasingly exotic efforts from the government to prevent the whole thing unravelling.
“Housing may prove one of the most interesting stories for 2023, with growing expectations for a substantial drop.
“The Office for Budget Responsibility expects a 9% decline, and Bloomberg Economics says the market may be as much as 20% overvalued. That could have a big impact on the economy, since property prices feed personal wealth and how confident consumers feel to keep spending,” said Reed Landberg, UK economy team leader.
“I think the most important economic variable, both in the UK and abroad, will be unemployment. That will be key to the severity of any recession, and also to what happens with house prices.
“If unemployment remains low, people will continue spending even in the face of a cost-of-living squeeze, and the housing market won’t see many forced sellers.”
John Stepek, senior reporter, Money Distilled newsletter said: “If unemployment rises significantly, the economy will be in a lot more trouble.”
Sunak’s growth plan
Business groups say the government has not got one, and the last “Growth Plan” – former chancellor Kwasi Kwarteng’s – nearly blew up the economy.
Which sets a high bar for excitement levels and at least proves a plan can have an impact.
“Sunak, a Silicon Valley acolyte, believes in tech, ideas, innovation and capital. Thrilling stuff, but he might be get bigger rewards simply by delivering on his promise to get the Northern Ireland protocol fixed,” said Philip Aldrick, UK economics editor.
Joe Easton, UK stocks editor said: “It sounds utterly boring, but bank impairments will be interesting to watch. This is where lenders put cash to one side if they’re worried that people and companies won’t pay their debts. It could start to become an interesting indicator of the effect rising interest rates are having on borrowers.
“In terms of stocks, I think UK homebuilders have fallen too much. The share prices are telling us there will be a sharp decline in property values and builders will have to write down the value of the land they own. That seems extreme, but on a personal note I kind of hope it’s true as I want to buy a flat next year.”
Technology
“Another Elon Musk hobby, specifically the SpaceX dearMoon mission partially funded by Japanese eCommerce billionaire Yusaku Maezawa. The plan is to send a group of artists on a spaceship around the moon next year, which sounds so crazy it might actually happen,” said Conrad Quilty-Harper, UK digital editor
Environment
“Every year is the year of no waste and upcycling but I’m very excited to see what producers will do with items that generate a lot of by-products, like the pulp from oat milk production. I’m also psyched to see how restaurants are emphasising locally sourced products. For instance at Dinings SW3 the chef Masaki Sugisaki, a sushi expert and Nobu alum, highlights fish from nearby places like lobster from Cornwall and sea bass from Wales, rather than bringing it all in from Japan,” said Kate Krader, food editor
“Global climate politics will get harder still.” — Bloomberg
