The U.K.’s gross domestic product is likely to contract by 0.4 percent in 2023. The country is estimated to have entered into an economic recession in the third quarter of 2022 that will last until the end of next year, according to the Confederation of British Industry (CBI).
The CBI had previously forecast GDP to rise 1.0 percent next year.
“Britain is in stagflation – with rocketing inflation, negative growth, falling productivity and business investment,” said CBI director general Tony Danker. ”Firms see potential growth opportunities, but a lack of ’reasons to believe’ in the face of headwinds are causing them to pause investing in 2023. Government can change this. Their action or inaction to support growth and investment will be a key determinant of whether recession is shallow or deep. We will see a lost decade of growth if action isn’t taken. GDP is a simple multiplier of two factors: people and their productivity. But we don’t have the people we need, nor the productivity.”
The CBI expects a relatively mild recession, with a peak-to-trough fall in output of 0.7 percent. GDP is seen rising by 4.5 percent in 2022 and by 1.6 percent in 2024, with a return to pre-Covid-19 levels only in the second quarter of 2024.
CBI believes that consumer prices peaked in October at a 40-year high of 11.1 percent and that they will fall gradually over the coming year. But prices will remain significantly above the Bank of England’s 2 percent target over 2023, ending the year at 3.9 percent, it added.
“This means that the squeeze on households seen this year persists into 2023, leading to a year-long decline in consumer spending,” the CBI warned.
