“Grey gloom” is not the front-page headline many Britons would have wanted to read at the start of the new year. But the phrase sums up the economic mood according to the Financial Times’s annual survey of economists. It is easy to see why. The UK economy shrank in the third quarter of last year, putting it on the cusp of a recession. It is expected to grow by about half a per cent in both 2023 and 2024 as the impact of high interest rates and elevated price levels squeeze households and businesses.

Economists are a melancholy bunch. A similarly downbeat outlook this time last year turned out to be overly pessimistic. Inflation fell faster than expected and unemployment did not surge as predicted. Revisions to gross domestic product also showed that Britain’s post-pandemic recovery was in line with G7 peers, and not the worst as previously forecast. Looking ahead, there are a few reasons why the bearish outlook on Britain may weaken.

First, Britain begins 2024 with a more stable policy outlook than in the recent past. That may be a low bar, given the political turmoil since 2016, but in the past year the government has overseen an improvement in the business environment. Ties with the EU have improved, and the UK has rejoined the bloc’s Horizon Europe science and research programme. The full expensing of capital investment was also made permanent in the Autumn Statement. The UK’s capital allowances are now among the most generous in the OECD, and businesses are spending again. Investment has finally jumped above levels before the Brexit referendum.