James Sproule, Chief Economist at Handelsbanken, gave us his views on the state of the UK economy. I came away with increased optimism about the future yet wondering why, if the fundamentals aren’t that bad, we’re all still acting so cautiously.
James framed the discussion around several key themes:
Consumer Confidence, Business Confidence, Productivity, Employment, Taxation, Interest Rates, Government Finances, Savings, Inflation, House Prices, Agility and Predictions.
It was a whistle‑stop tour of the forces shaping our economic landscape.
A Mixed Picture — But More Optimism Than You Might Expect
What struck me most was that, despite the noise, uncertainty, and doom‑laden headlines, there is actually a surprising amount of financial firepower waiting to be deployed. Businesses and households both have cash on hand. The issue? Confidence.
Innovation, entrepreneurial endeavour, digitisation, new products, new market opportunities — the appetite is there, but many firms seem to be sitting on their hands, waiting for something to signal the all-clear and we can return to more certain times.
If only we could bottle James’s sense of cautious optimism and share it more widely.
Employment: The Red Flag
The one issue that did raise eyebrows was the recent jump in unemployment figures to 5.2% — the highest in five years. Young people, in particular, are bearing the brunt.
It does raise a question:
Are rising costs — National Insurance, the National Living Wage — starting to have unintended consequences on hiring?
Growth is flat. Employment is flat. And right now, businesses simply aren’t recruiting.
Confidence: Consumers Nervous, Businesses Hesitant
- Consumer confidence continues to dip, as uncertainty makes people think twice about spending.
- Business confidence is slightly more positive, but still too fragile to trigger major investment or hiring.
- Productivity, notoriously hard to measure in a service-based economy, is finally showing some upward movement — but it’s a thin silver lining.
As James put it: we have the capacity to grow, but not yet the belief.
Interest Rates & Inflation: Close to the Bottom of the Cycle
One of the more encouraging signals was the outlook for interest rates. We may well see two more cuts this year, potentially settling around 3.25%. That would bring us close to the bottom of the rate cycle.
Inflation, once over 10% in 2022, has fallen to around 3.5% — but James warned it remains sticky, fuelled by wage pressures and rising expectations and is still well above the 2% target.
Public Finances: The Weak Link
On Government finances, James didn’t sugar-coat it.
The Chancellor is sticking to the “golden rules”, but debt is still rising and taxes are at historic highs.
His quote of the day:
“No government has ever spent more or raised more in taxation than this current incumbent.”
High taxation, he argued, is pushing some towards economic inactivity and benefits — not a recipe for growth.
Savings, Investment & a Nervous Nation
Savings levels are up, and households have more potential spending power than you might expect. But consumers are reluctant to release it.
Similarly, the corporate investment market is stagnant, not for lack of money but lack of confidence. Again, the theme keeps circling back: we’re waiting for certainty that may never arrive.
House Prices & the Market Ahead
House prices are being pulled by four invisible hands:
Affordability: Supply & Demand: Wealth: Property Yields.
Right now, they’re balancing each other out — resulting in a flat market. Movement will only come with improved confidence levels.
So… How Do We Grow the Economy?
James laid out two clear pathways:
- Communicate stability to the markets and get serious about reducing debt.
- Reignite entrepreneurialism, tapping into one of the UK’s greatest strengths.
Stability + entrepreneurial energy = growth. It’s what Britain has always done well.
Final Thoughts — A Country Capable of More
Despite the challenges, James’s underlying message was one of resilience and potential. The UK has always thrived not because we’re the biggest, but because we’re adaptable.
As Darwin put it:
“It’s not the strongest that survive — it’s the most agile.”
When asked to score his confidence in the UK economy, James gave it:
- 4/10 in the short term
- Rising to 7/10 longer term, if we confront our challenges head‑on.
And for the first time in a while, I walked away thinking:
Maybe things aren’t as bleak as they look. Maybe we just need to be a bit braver.