How will Kent fare in recession Britain?
SPECIAL REPORT: What would a UK recession mean for Kent’s economy?
With a General Election pencilled in for the middle of November 2024, the UK economy is under the spotlight this year. Experts are forecasting a recession in the early months of 2024 which could have an adverse impact on Kent’s economy and business ecosystem. In this special report, we explore the key areas to watch in 2024. If this newsletter was forwarded to you, please consider subscribing so you don’t miss a future edition:
Will ‘Recession Britain’ arrive in the Garden of England?
What would a UK recession mean for Kent’s economy? We explore how this could play out in 2024.
Kent’s economy is entering a tricky period. Elevated taxation, higher borrowing costs, and increased living expenses means households and businesses across the county are under pressure.
It is also an election year with Rishi Sunak expected to offer voters a number of handouts at the upcoming Budget 2024 in March. The Prime Minister is vulnerable in Kent where a number of swing seats could determine his future in Downing Street, especially in the Medway towns. For the most part, the former Chancellor will be judged by Kent voters on his economic record.
Bigger picture, our national economy is teetering on the verge of recession after securing a meagre 0.3% growth last year. Starting 2024, economists predict that a recession is 50:50 likely this year. Many forecast that it will be shallow contraction if it takes place but any drop in growth could leave our county’s economy and businesses especially vulnerable.
Here are four graphs which will define Kent & Medway’s economic prospects in 2024.
Slow but accelerating unemployment
Reduced economic activity and higher borrowing costs are taking their toll on businesses across Kent. Despite this, a skills gap and hiring shortages have pushed employment levels to record highs across the UK in recent years. However, this could be about to change as employers show signs they are starting to scale back their investment and hiring plans in 2024.
Nationally, the Office for Budget Responsibility predicts that unemployment will rise to 1.6 million this year, up from the current level of 1.5 million. In Kent, unemployment levels have been inching up for the past few months with a number of large employers such as Pfizer in Sandwich announcing large redundancy rounds. Year-on-year, only one district area Thanet saw a drop in unemployment levels. On the flip side, Gravesham in North Kent saw a 12% increase in unemployment with Canterbury following closely behind (10%).
The latest Quarterly Economic Survey for Q4’2023 from the Kent Chamber of Commerce suggests that more is to come. Of the 51% of businesses in Kent who looked to recruit during the quarter, 71% faced difficulty in recruiting, a huge drop from 91% in the previous quarter. Perhaps this shows that the local job market will soon see some slack.
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More businesses find themselves on the brink
UK businesses are increasingly operating in a high-risk environment with many now in survival mode. Firms have been hit by a barrage of costs in the last year, including higher interest rates, energy and staff wage bills, while also grappling with low consumer confidence. This week, the Government Insolvency Service reported that the number of companies in England and Wales that went bust in 2023 was on track to hit the highest annual level since the period after the financial crisis in 2009.
This is being reflected in Kent’s own data with the number of enterprises in March 2023 down 1.5% year-on-year. When compared with 2010, the number of enterprises in Kent has grown by 28.9%, a larger increase than was seen in the South East region (+22.5%) but lower than the national growth of 30.4%. Kent’s high exposure to at-risk industries such as retail, leisure, and construction makes the county particularly vulnerable to business closures. We saw this last year with Wilko but are likely to see more in 2024 as firms feel the pressure.
With weak consumer confidence and higher operating costs impacting margins, Kent’s business leaders will feel the pressure even more in 2024.
Can our shopping centres steady the ship?
The county’s shopping centres and high streets remain in the thick of it. Inflation has dented consumer spending with retailers experiencing the brunt of economic headwinds. As a result, shop owners and retailers are increasingly feeling bruised from this period, and saw a very minor growth in sales during the final month of 2023 as a result of double figures inflation earlier in the year pushing up overall transaction values.
The Post’s own analysis highlights that online searches for the county’s top shopping centre Bluewater was significantly down during Q4’2023. At Bluewater, searches fell by 9.8% year-on-year in December 2033. Online searches are an indicator of shopper activity with search volumes reflecting those looking for opening hours, directions, or further details on a location. Despite all this, Bluewater’s owner Landsec told The Sunday Times last weekend that the centre remains a prime retail investment opportunity.
In response to the increasing shift to shopping online post-Covid, Kent shopping malls and high streets are undergoing adaptations and innovations. Some are diversifying their tenant mix by attracting new businesses and experiences, such as leisure facilities, while others are investing in marketing campaigns and events to revitalise their areas. Despite these efforts, the challenge persists in revitalising the trade, underscoring the need for ongoing innovation to ensure vibrant commerce and community life in the future.
However, in the face of the ever-changing retail landscape and the hurdles confronting traditional brick-and-mortar stores, the prospects of our retail sector reinventing itself this year may be overwhelmed by the relentless tide of change.
The property market remains elevated… for now
The state of the UK property market is currently shaped by a multifaceted interplay of factors. On one front, the housing market grapples with significant inertia, primarily stemming from the hurdles potential buyers face, such as elevated mortgage rates and stretched affordability. The combination of rising borrowing costs and a persistent strain on household incomes has led to a scenario where individuals are postponing their home-buying plans, encountering increased difficulty in securing mortgages. The escalating cost of living has further compounded the challenges for first-time buyers, making it even more arduous to accumulate the necessary deposit for property purchases.
Kent’s property market is going through a period of change itself. In just two years, the volume of finalised property transactions in Kent has experienced a drastic reduction, plummeting from 15,099 in the latter half of 2021 to a mere 7,499 in the initial six months of 2023. Concurrently, the average property prices in Kent have witnessed a decline of 1.83% during this period. However, it is important to note that the impact on property prices varies across the county, resulting in a mixed landscape of fluctuations.
Looking to 2024, the dip in prices could create improved buying levels. Real estate agent Leaders notes: ‘for those that might have held off selling and buying in 2023, it looks like 2024 could be a really good market.’ The jury is out on whether 2024 could see a drop in the average price as buyers secure discounts or the systemic shortage of houses across the UK keeps the county’s property market elevated.
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