Four reasons why the economy will offer Burnham an unexpected boost

Andy Burnham will assume the role of Prime Minister on Monday, stepping into office amid what analysts describe as the third-strongest economic backdrop among his 13 predecessors in the past five decades. According to a study conducted by Public First and the Prosperity Alliance, Burnham's initial economic conditions compare favorably to those faced by only two other leaders, Tony Blair and Theresa May, who took charge of the country during periods of relatively stable economic performance. The analysis compared Burnham’s projected first-year economic indicators with historical data for his predecessors, focusing on key metrics such as inflation, unemployment, borrowing, and GDP growth. The findings suggest that Burnham’s administration will have greater flexibility in managing the economy than many of its predecessors. Inflation, currently standing at 2.8 percent, remains above the Bank of England’s target of 2 percent. However, the central forecast indicates that inflation is expected to decline throughout Burnham’s first year, aligning with the levels observed under Blair and placing him second among his predecessors. Only Boris Johnson, who oversaw a period marked by pandemic-related disruptions, saw a lower inflation rate during his first year in office. In contrast, leaders such as Harold Wilson and Margaret Thatcher inherited high inflation rates in the 1970s and 1980s. Unemployment, currently at 4.9 percent, is projected to decrease by 0.5 percentage points within Burnham’s first year. This follows a sustained downward trend, with the unemployment rate having fallen for two consecutive quarters after peaking at 5.2 percent late last year. On this measure, Burnham ranks third among his predecessors, with only Blair and May achieving similar reductions in their early years. Nevertheless, he faces a unique challenge: a record number of 1.1 million young people aged 16 to 24 are neither in education, employment, nor training, a figure not exceeded since 2013. Public sector net borrowing, which measures the difference between government expenditure and revenue, is forecast to decline by 0.7 percentage points of GDP during Burnham’s first year. This represents an improvement compared to the situation inherited by his predecessor, Sir Keir Starmer. Burnham has emphasized the importance of maintaining sound public finances, stating that his policies will adhere to the fiscal rules established by Rachel Reeves. These rules require that tax revenues cover routine expenses and that debt should decrease as a proportion of the economy, allowing borrowing solely for investment purposes. Gross domestic product (GDP) growth is expected to reach 1.6 percent in Burnham’s first year, though this is anticipated to slow to 1.1 percent later in the year. This places Burnham fifth among his predecessors in terms of initial economic expansion, trailing behind the stronger performances of Blair, May, and James Callaghan. However, it surpasses the economic downturns faced by Johnson and Thatcher upon taking office. Scott Corfe, an economist at Public First, noted that while the economy will grow, the pace will be one of stabilization rather than rapid expansion. He warned that real wage increases will likely remain modest, and public confidence in the economy is expected to stay low.