According to the IMF, the UK economy will be the weakest of the G7 nations, which comprises Canada, France, Germany, Italy, Japan, and the USA. They predict our economy will decline by 0.3% in 2023 in comparison to other group member countries.

The IMF’s forecast takes several factors into account in reaching its prediction. They include Brexit, COVID-19, and the slowdown of the UK housing market.

The aftermath of Brexit is a key factor, as agreed by the trade policy adviser at the Institute of Directors, Ms Emma Rowland. She is reported as saying that leaving the Union has exerted the biggest influence on businesses’ export strategies, putting hurdles in place regarding trade and facilitating increased competition from EU-based companies.

Figures for the last quarter of 2022 published by the ONS in March showed that the volume of exports (excluding precious metals) was 9% worse than the pre-pandemic average in 2019. Resolution Foundation think-tank economist, Sophie Hale, labelled the performance, which led to us being relegated to the bottom position in the G7, as “disastrous.”

The COVID pandemic is also partly responsible for the poor UK economic performance. The lockdown saw many people lose their jobs. Although there has been a significant recovery, according to figures released by the ONS, 565,000 more people were economically inactive at the end of 2022 than before the outbreak. The main concentration is those aged 50 and above, many of whom are now long-term sick.

It has also meant that many of those aged over 65 will remain inactive – a problem Chancellor Jeremy Thorpe sought to address in the Spring budget. He said hoped his changes to pension rules would tempt people back into work. It remains to be seen how effective these changes will be.

Brexit remains the elephant in the room, with the government maintaining it is not easy to differentiate between its effects and those of the pandemic. Many economic pundits believe that COVID is being used as an excuse to hide the effects of leaving the EU.

Another factor in the underperformance of the UK economy is the UK housing market, with property prices dropping from previous peak levels and further significant drops expected throughout 2023. January 2023 saw the average UK house price fall by a further 1.1% to £289,818.

Frank Knight, the estate agents, are predicting a 5% fall in house prices by the end of 2023, with a similar fall expected in 2024. Capital Economics analysts are forecasting a total 12% fall by the middle of 2024. The OBR (Office for Budget Responsibility) is predicting a 9% fall between now and the autumn of 2024.

House prices are the marker used by many UK residents to analyse their financial well-being. A fall in house prices has a negative effect, which can translate to lower consumer spending, a major driver, or in this case, a slower down of UK economy growth.

However, it’s not all doom and gloom. The IMF’s predicted 0.3% shrinkage figure is an improvement on their previous forecast, which predicted a 0.6% loss. For 2024, they are forecasting a 1% increase in UK economic growth.

The IMF doesn’t always get it right, of course. Former IMF MD (2011 to 2019) Christine Madeleine Odette Lagarde famously apologised on her knees, saying they got it wrong and acknowledged it, having accused George Osborne in 2014 of “playing with fire”, as she put it, on austerity. They’ve made several erroneous forecasts since then too.

Despite the UK’s fall in standing among the G7, UK investors can take steps to protect their investment portfolios and grow their wealth during these uncertain times. One option is to consider investing in platforms that offers a range of investment solutions to suit different investor profiles, risk tolerance, and investment goals.

Many forecasters now believe that the chances of the UK economy going into recession are receding. In addition, while the OBR expects our economy to shrink by 0.2%, they, too, are of the opinion that we will avoid a recession. Also, Andrew Bailey, governor of the BoE, said he was much more hopeful we were not heading for an immediate recession.

Whatever happens in the short term, those looking to invest long-term should remain optimistic – especially those thinking of turning to thematic investing in megatrends. Companies like Tesla are showing improved performance as the trend for the uptake of electric vehicles contuses to grow.