News of a mild recession in H2 2023 is unlikely to take the Bank of England’s focus away from pay growth and inflation. We continue to expect the first Bank Rate cut to come in June.

• The UK economy entered a mild technical recession in the second half of 2023, but timelier indicators point to resilience in H1 2024 and a recovery later in the year.
• The Bank of England (BoE) is still looking for more evidence of fading services inflation and moderating pay growth before cutting interest rates, but the trend indicates to us that the first cut is still likely to come next quarter.
• As such, UK real estate markets remain highly-driven by interest rates movements, but attractive fundamentals and signs of a trough in pricing are gradually bringing more investors back to the market.
• Lenders remain reluctant to take poorly-performing assets on to their balance sheets, with write-offs of non-performing loans to real estate companies remaining minimal compared to the post-GFC period.

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