Pantheon Macroeconomics

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U.K. Publications

Below is a list of our U.K. Publications for the last 6 months. If you are looking for reports older than 6 months please email info@pantheonmacro.com, or contact your account rep

Please use the filters on the right to search for a specific date or topic.

tax cuts

18 Nov 2022 UK Monitor The Cliff-Edge in Energy Price Support Next Year will Aggravate the Recession

  • Most of the spending cuts and tax rises announced by Mr. Hunt do not kick-in until after the next election...
  • ...But the rapid withdrawal of energy price support next year will ensure that the economy remains in recession.
  • Mr. Hunt has less fiscal headroom than his predecessors; further adverse shocks will be met with extra cuts.

Samuel Tombs (UK Economist)U.K.

2 Nov 2022 UK Monitor Which Taxes will the New Chancellor Hike

  • Press reports suggest that the tax rises will account for about half of Mr. Hunt’s £50B consolidation.
  • Windfall taxes aren’t long-term money-raisers; a VAT hike could have harmful second-round effects on inflation.
  • So personal tax rises will bear the brunt; expect the NI rise to be reimposed, and the basic rate limit to fall.

Samuel Tombs (UK Economist)U.K.

11 Oct 2022 UK Monitor Gilt Yields Likely to be Lower by Year- end, as the MPC Hikes Cautiously

  • Gilt yields rose again yesterday, as the BoE confirmed
    its bond-buying programme will end on Friday.
  • Signs that the government has changed tack, however, continue to amass; the MPC can be cautious.
  • Reducing public sector investment back to its share of GDP in the 2010s would offset the tax cut stimulus.

Samuel Tombs (UK Economist)U.K.

4 Oct 2022 UK Monitor Forecast Review, A Recession Induced by Policymakers Lies Ahead

  • We now look for a 1.5% year-over-year drop in GDP in 2023, worse than our prior forecast for a 1.2% decline.
  • The Energy Price Guarantee has shored up real in- comes, but the tax cuts are counterproductive, net...
  • ...The hit from the resulting drop in sterling and rise in mortgage rates will outweigh the direct fiscal boost.

Samuel Tombs (UK Economist)U.K.

28 Sept 2022 UK Monitor Surveys Point to a Small Drop in GDP in Q3, but this is Just the Start

  • PMI and confidence data for September suggest GDP edged down for a second consecutive quarter in Q3.
  • The downturn will gather momentum, as borrowing costs for households and businesses soar.
  • We now look for a 1.5% year-over-year decline in GDP in 2023, and CPI inflation not to return to 2% until 2025.

Samuel Tombs (UK Economist)U.K.

27 Sept 2022 UK Monitor Will the MPC Pick Prolonged High Inflation or a Mortgage Crisis

  • A recession now is all but inevitable; the key questionis how the pain will be distributed.
  • Hiking Bank Rate to 6% would crush domestically-generated inflation; mortgage defaults would soar.
  • Hiking more slowly would depress sterling and boost imported inflation, but is the lesser evil for the MPC.

Samuel Tombs (UK Economist)U.K.

26 Sept 2022 UK Monitor Mini-Budget Measures Won't Revitalise the Economy Next Year

  • Tax cuts which disproportionately benefit the top 1% of earners will do little to boost demand.
  • Most households are worse off, because the associated depreciation of sterling will raise the price level by 1.5%.
  • Mr. Kwarteng likely will impose tough spending limits in the Budget, to try to reverse the jump in gilt yields. 

Samuel Tombs (UK Economist)U.K.

23 Sept 2022 UK Monitor MPC Likely to Stick to Another 50bp Hike in November, Despite Tax Cuts

  • The improved near-term outlook for CPI inflation has left the MPC less anxious about second-round effects.
  • The MPC is awaiting more details on fiscal policy; a 75bp hike in November can't be ruled out...
  • ...But the proposed tax cuts will do little to boost GDP, and spending might be cut; we still expect a 50bp hike.

Samuel Tombs (UK Economist)U.K.

22 Sept 2022 UK Monitor Gilt Issuance to Hit Eye-Watering Levels Next Year

  • Public borrowing has tracked the OBR's forecast this year, but government spending now will soar.
  • Loans to energy suppliers, to limit energy price rises, will boost the cash requirement, but not borrowing.
  • We look for a gross financing requirement of about £325B in 2023/24, but the outlook is very uncertain.

Samuel Tombs (UK Economist)U.K.

16 Sept 2022 UK Monitor The Improved Inflation Outlook Implies the MPC will Stick to a 50bp Hike

  • We think the MPC will raise Bank Rate by 50bp next week, despite other central banks rushing ahead...
  • ...Q3 GDP is set to undershoot the MPC’s latest forecast, while the inflation outlook has improved greatly.
  • Proposed tax cuts are too small to move the inflation needle, and likely will be partly funded by spending cuts.

Samuel Tombs (UK Economist)U.K.

9 Sept 2022 UK Monitor A Recession Now Looks Unlikely, following Bold Energy Price Action

  • The average household will spend less on energy over the next six months than during the last six.
  • So a winter recession now looks unlikely, and the MPC can return to focussing on core CPI inflation.
  • Fiscal policy will stabilise demand, not lift it; job market slack still looks set to emerge, limiting rate hikes.

Samuel Tombs (UK Economist)U.K.

6 Sept 2022 UK Monitor How will Energy Price Interventions Impact the Inflation Outlook?

  • Ms. Truss has been tight-lipped about her plans, but a
    trade body plan to freeze prices is gaining traction.
  • If implemented, CPI inflation will return to the 2% target in 2023, easing the pressure for further big rate hikes.
  • Firms need help too, though we think Ms. Truss will cut business rates and provide grants, not reduce VAT.

Samuel Tombs (UK Economist)U.K.

1 Sept 2022 UK Monitor Capex will Continue to Recover, Despite the Risk of Recession

  • Business investment rose again in Q2, as key uncertainties faded and supply constraints began to ease.
  • We expect a further rebound in H2; balance sheets are strong and investment intentions still are high.
  • But we doubt capex will return to its pre-Brexit share of GDP; the U.K is a less desirable place to invest.

Gabriella DickensU.K.

23 Aug 2022 UK Monitor Public Borrowing of £170B this Year Likely Needed to Avert a Recession

Interest payments look set to be about £37B higher in 2022/23 than the OBR forecast in March.

So the next PM will have to borrow more this year than last to have a fighting chance of averting a recession.

We expect Ms. Truss to unveil tax cuts and extra grants worth an extra £20B this year, and £44B in 2023/24.

Samuel Tombs (UK Economist)U.K.

22 Aug 2022 UK Monitor How Much Longer Can Consumers Hold the Line?

Retail sales edged up in July and will benefit in August from Cost of Living grants and the NI threshold hike.

October's energy bill increase will hit real incomes by nearly 4pp; current grants will offset only half that hit...

...But the next PM likely will beef up and extend the current grants sufficiently to prevent a recession.

Samuel Tombs (UK Economist)U.K.

19 Aug 2022 UK Monitor The U.K.'s High Inflation is Due to Fiscal Policy, Not an Overheating Economy

The U.K.'s relatively high rate of CPI inflation is largely due to government policies.

The energy price shock has been softened by grants, not tax cuts; VAT and NICs hikes have also played a role.

Higher core goods inflation than in the Eurozone is largely due to Brexit, not stronger underlying demand.

Samuel Tombs (UK Economist)U.K.

10 Aug 2022 UK Monitor Rate Cuts Next Year? Don't Price Them In Until Q4 2023 at the Earliest

Dave Ramsden is the first MPC member to admit rates might need to be cut "quite quickly" in the medium term.

The cuts currently priced-in by markets from late H2 2023 aren't big enough to lower households' interest bill.

But CPI inflation won't be near the target until Q4 2023; pre-election fiscal stimulus will limit the scope for easing.

Samuel Tombs (UK Economist)U.K.

3 Aug 2022 UK Monitor Surging Mortgage Rates Point to an Outright Drop in House Prices

House purchase demand is falling quickly in response to the jump in mortgage rates and drop in real incomes.

New mortgage rates look set to rise further in Q3, greatly weighing on approvals.

A contraction in supply, however, will prevent a slump in prices; we still forecast a modest 2% decline in H2 2022.

Gabriella DickensU.K.

2 Aug 2022 UK Monitor Forecast Review: Fiscal Policy and Lower Saving Likely to Avert Recession

We have revised up our forecast for Q4 CPI inflation by 1.0pp since early July; energy prices have surged again.

But we have revised down our forecast for the level of GDP by only 0.5pp in Q4; fiscal policy will respond.

People also have shown more willingness to deplete savings; we still expect a recession to be narrowly avoided.

Samuel Tombs (UK Economist)U.K.

22 July 2022 UK Monitor A Balanced Current Budget won't be Seen Again if Ms. Truss Becomes PM

Accrued debt interest looks set to top the OBR’s forecast by £21B this year, and £15B in the medium term...

...This leaves insufficient headroom for Ms. Truss to de- liver her tax cuts and still run a balanced current budget.

Labour supply has not been hit by April’s increase in NI contributions; reversing it won't be self-funding.

Samuel Tombs (UK Economist)U.K.

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