The UK will be in recession until the end of next year with the economy weighed down by high inflation, low growth and weak business investment, according to the Confederation of British Industry (CBI).
The business group says that the UK economy is likely to have fallen into a recession in the third quarter of this year. It expects the recession to last until the end of 2023 and, as a result, it has downgraded its GDP growth outlook for 2023 significantly, to -0.4% from 1.0%.
Although the CBI believes inflation peaked at 11.1% in October, it predicts it will remain significantly above the Bank of England’s 2% target throughout 2023, ending the year at 3.9%.
That will continue the squeeze on households and, therefore, also on consumer spending, which will in turn weigh on business investment. The CBI thinks this will falling from mid-2023 onwards.
Its outlook improves for 2024, when it believes the economy will grow by 1.6%, thanks to inflation falling and the squeeze on households alleviating.
Tony Danker, the CBI’s Director General, said: ‘Britain is in stagflation – with rocketing inflation, negative growth, falling productivity and business investment.
‘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 people we need, nor the productivity.’