A century ago, the ‘Roaring Twenties’, as they became known, were about to get into full swing. 1924 represented the year in which the economy began to flourish, when the pick-up and recovery from the devastation of the First World War really began. A bit of a cultural revolution also took hold, and we saw new technology such as cars, films, electrical appliances and radio impact positively on people’s lives. Wall Street began to boom through much of the rest of the decade due to an outbreak of optimism.
A century on, the 2020s got off to anything but a roaring start with a pandemic and lockdowns inflicting lasting damage on economies around the world. Following the major economic collapse and subsequent record rebound in economic activity, we’re getting a clearer picture of the underlying health of the economy. We averted a depression but we’re now experiencing payback for the measures that had to be taken. This is noticeable in the form of interest rates rising significantly from their record lows and taxes increasing, particularly in the UK. Low growth, high debt and high inflation will characterise the economy going into 2024.
The UK economy has already been broadly flatlining and this trend is expected to continue into the year ahead, with marginal growth at best. And it is anticipated to be a similar story in the Eurozone, with economic growth of less than one percent expected there as well.
On the positive side, Bank of England bank rate may have peaked and indeed we’re already seeing mortgage rates starting to come down. 2024 is therefore going to be better overall on the interest rate front than 2023.
But whilst mortgage rates have passed their peak, mortgage pain hasn’t. We have to remember that lots of people will be rolling off fixed-rate mortgage deals this year and are going to abruptly enter the new reality, meaning a big increase in their mortgage payments at the same time as taxes are rising, and families are seeing a big rise in the cost of childcare. So, whilst we might hear a narrative of the cost-of-living crisis easing, the reality for many may be vastly different. This could lead to rising discontent. However, savers are enjoying returns not seen since the noughties.
On the housing front, a softening in UK house prices is likely to continue. While Northern Ireland has been resilient thus far, it too could discover that 2023 represented the price peak. Estate agents will be even more concerned though at the falling level of sales and the lack of supply of new homes.
Locally, 2023 saw the lowest level of house-building in over a decade and next year is going to be more of the same. One of the key pressure points is the rental market where people in their 20s are roaring at the soaring cost of rent and the lack of availability. This housing crisis (or lack of supply) is set to intensify in 2024.
The early 2020s have seen soaring levels of working from home. Depending on who you ask – employers or employees – people either love or hate this new working practice to varying degrees. 2024 will see more friction on this front between employers wanting workers in the office more and employees preferring the status quo. With the weakening economy, the labour market is set to soften with unemployment rising and employers coming under less pressure on the staff retention front. The balance of power could therefore shift back towards employers. But any major moves to remove working-from-home rights would certainly lead to uproar in some quarters.
With dissatisfaction evident in many economies, resulting from cost pressures and rising taxes, we could see this reflected in ballot boxes in 2024, with upwards of 40 general elections globally in the year ahead. The big ones are the UK Presidential Election, a potential UK General Election, and elections in India and Taiwan to name but a few.
In the US, it is being billed as Trump vs Biden round two. But don’t be surprised if it’s actually neither. If one of the parties opts for a younger candidate, expect the other to follow suit. The outcome of the US election could shape the US approach to both the conflicts in the Middle East and Ukraine.
Locally, while there are no elections due, there is no government in place from the last election. Meanwhile, NHS waiting lists in Northern Ireland are at record levels, wider public services are deteriorating, and the ire of public workers continues to build regarding pay deals. This is leading to increasing dissatisfaction with the failure of the politicians to get back into power and in some cases people, literally, roaring at the politicians to get back to Stormont. The carrot of a £2.5billion deal has got the politicians seriously talking. However, even this large sum won’t be a fix for the challenges ahead.
The roaring 20s a century ago were characterised by robust economic growth and soaring optimism. The decade that we’re in is very different, given the constraints on public finances. Even the most optimistic economists aren’t forecasting a roaring economy during the rest of the 2020s. Rising trade protectionism, higher interest rates and constrained public finances will dampen economic growth.
Addressing the roar of discontent will be high on the agenda of all of those who win the 40-plus general elections around the world in 2024. It will also have to be high on the agenda of an incoming Stormont Executive should a deal be done. Incoming governments will also need to lay the foundations to enable economies rather than a dissatisfied electorate to roar in the 2030s.
:: Richard Ramsey is Northern Ireland chief economist at Ulster Bank
