The UK’s largest business organisation claims that the country is already in a recession that will last into next year.
The Confederation of British Industry (CBI) lowered its projection for economic growth in the face of a deteriorating corporate investment environment, rising prices, persistently high interest rates, and a labour shortage.
According to the CBI, the economy will decrease 0.4% in 2023. This is a considerable downgrade from the organisation’s previous projection of 2023 economic growth of 1%. The economy, on the other hand, is predicted to expand 4.5% this year.
Consumer spending is expected to decrease during the course of the year as a result of the slowdown as economic pressures increase.
A “relatively modest” recession is expected, fuelled by high inflation that has already peaked, according to the CBI, and will level out next year.
The most recent economic statistic to suggest that the UK is predicted to perform worse than the vast majority of wealthy economies is the CBI pronouncement. Only Germany’s economic output is expected to decline more quickly, forecast to shrink by 0.6%.
Despite an increase of 1.6% in economic growth in 2024, the CBI warned that these negative economic effects would continue to have an influence on economic performance in the years to come.
According to the CBI, output per worker will drop from its current low level. It anticipates that productivity will stay 19% below pre-financial crisis levels and 2% below its “already dismal” pre-COVID-19 trajectory.
Similarly, despite an expected economic recovery by 2024, company investment is expected to remain 9% below pre-pandemic levels.
The CBI claimed that by modernising the national planning policy framework and abolishing what it referred to as the de facto ban on onshore wind, authorities could enhance investment.
One of the main causes of much of the economic difficulties is price increases. While the CBI claimed that inflation will continue “substantially over” the Bank of England’s 2% target throughout next year, and decline to 3.9% by year’s end, it is believed to have peaked in October 2022 at 11.1%.
Although the number shows a drop, the organisation added that the likelihood of more inflation “remains strong” and is based on how the level of global price pressure changes.
Businesses are also having trouble finding enough employees to fill open positions, with the CBI predicting that three-quarters of businesses are experiencing shortages. As a result, the government has been urged to adopt a “more flexible” immigration policy, decrease the number of people who are unemployed or underemployed, and take appropriate measures.
As the number of people neither working nor seeking for employment increased to nine million, Tom Danker, the head of the CBI, called for using immigration to address workforce shortages.
According to the CBI, unemployment will increase in 2019 and reach a peak of 5% in late 2019 or early 2024. Currently, the rate is 3.6%.
The carefully monitored S&P Global CIPS UK Services (PMI) for November, which gauges economic activity in the services sector, confirmed the state of the economy.
According to data from last month, a recession will technically start in the fourth quarter of this year and pick up speed in the first three months of 2023.
According to the PMI report, inflation has not reduced enough for the Bank of England to scale back its interest rate hike timetable.