Economic summary

News

Since the last post the UK economy has exhibited modest growth alongside mounting challenges. The International Monetary Fund (IMF) revised its 2025 GDP growth forecast upward to 1.2%, attributing this to strong first-quarter performance. However, inflation rose to 3.5% in April, driven by increased energy and water bills, higher business taxes, and a substantial minimum wage hike, complicating the Bank of England’s monetary policy decisions. In response, the Bank reduced the Bank Rate to 4.25% in early May but signalled caution for further cuts this year.

The business landscape has also faced significant headwinds, particularly in retail and manufacturing sectors. Major retailers, including Poundland, announced multiple store closures due to rising operational costs and weakened consumer spending. The S&P Global UK Composite Purchasing Managers’ Index indicated a slight easing in the business downturn, with the services sector showing modest growth, but manufacturing continued to decline, with job cuts at one of the fastest rates since the global financial crisis.

Amid these challenges, the government advanced its economic strategy by securing trade deals with the US, India, and the EU, aiming to bolster international trade relations. While these agreements are not expected to significantly boost GDP in the short term, they are seen as steps toward economic recovery and global reintegration.

Indicators

• Average house price rose to £271 k in March.
• Mortgage rates for both 60 % and 95 % LTV mortgages have continued their downward trajectory, now at approximately 4.22 % (-0.10 ppt) and 5.32 % (-0.12 ppt) respectively.

Predictions

Overall

House prices are set to continue their climb over the next two years, with the strongest momentum through 2026. After rising from £271 k today to about £283 k in a year’s time (+4.5 %), growth accelerates to £313 k by spring 2027 (+15.4 % total). Thereafter, annual gains moderate but remain positive, taking the average UK price to £355 k by March 2030 (+31 % over five years).

Regional

Our regional breakdown shows positive price growth across all parts of the UK over the next 12 months, but with wide variation:

• Top-performers (1 yr):
  • East Midlands (≈ 6.5 %) and South West (≈ 6.4 %) lead the pack, reflecting strong affordability and ongoing demand outside the capital.
  • West Midlands (5.9 %) and East of England (5.3 %) follow closely.
• Lagging regions (1 yr):
  • London (2.1 %) and the South East (0.9 %) post the smallest gains, constrained by high price bases and tighter budgets.

Looking further ahead:

Long term (5 yrs): the East of England dominates with nearly 38 % total growth, followed by the South West (35 %) and East Midlands (35 %). The North East lags at around 17 %, and London again posts the slowest long-run advance (≈ 23 %).

Medium term (2 yrs): the East Midlands and North West surge with cumulative rises of ~19 % and ~18.5 % respectively, while London remains under 8 %.

Local

Drilling down to local authority forecasts:

12-Month Outlook (to Mar 2026)

West Oxfordshire and Horsham (both -0.4 %)
High-price South East markets and former commuter hotspots are seeing affordability pressures and subdued demand.

Highest growth in:

Bath and North East Somerset (+9.7 %)

Cotswold (+8.3 %)

Hinckley and Bosworth (+8.1 %)

Worcester (+7.9 %)

Mid Devon (+7.7 %)
These areas combine strong employment markets with attractive living environments and remain within commuting distance of major cities.

Weakest growth in:

Barking and Dagenham (-2.8 %)

Gosport (-1.1 %)

Crawley (-0.7 %)

24-Month Outlook (to Mar 2027)

• Top areas:
  • Stockport leads on +25.8 %, joined by Blaby (+23.4 %) and several Cheshire/Greater Manchester boroughs at ~23 %.
• Bottom areas:
  • London boroughs (Wandsworth, Kingston upon Thames, Barking and Dagenham, Lambeth) all under 7 %, reflecting the city’s stretched affordability.

60-Month Outlook (to Mar 2030)

• Strongest five-year growth clusters around the East of England commuter belt:
  • Cambridge (+47.5 %), Brentwood (+47.1 %), St Albans (+45.0 %), Epping Forest (+43.4 %), Hertsmere (+43.3 %).
• Slowest five-year growth remains in the North East post-industrial heartlands:
  • County Durham (+15.6 %), Hartlepool (+15.3 %), Darlington (+15.0 %), Tyne and Wear (+14.9 %), Sunderland (+13.6 %).

Note: High-value anomalies (e.g. Kensington & Chelsea, City of London) continue to be excluded from local rankings due to price-point volatility skewing averages.

Conclusion

The latest model reinforces a clear theme: regional markets outside of London are where both short- and long-term house price gains are strongest. Commuter belt and “lifestyle” locations in the Midlands, South West and East of England consistently rank at the top of our forecasts, while inner-city London and North East post-industrial areas trail behind.

As ever, local fundamentals—employment growth, infrastructure projects, planning constraints—and macro drivers—interest rates, inflation, fiscal policy—will continue to shape these trajectories. We’ll return in July with updated ONS data and model refinements. Stay tuned!