The UK economy is on track to contract by 0.4% next year, as inflation remains high and businesses halt investment, with grim implications for long-term growth, the Confederation of Business Industry forecast on Monday. “Britain is in stagflation, with skyrocketing inflation, negative growth, falling productivity and business investment. Companies see potential opportunities for growth, but… headwinds are causing them to stop investing in 2023,” said CBI CEO Tony Danker.
The CBI forecast marks a sharp downgrade from its last forecast in June, when it predicted 1.0% growth by 2023, and it does not expect gross domestic product (GDP) to return to its pre-COVID level until mid-2024.
Britain was hit hard by the rise in natural gas prices that followed Russia‘s invasion of Ukraine.as well as an incomplete labor market recovery after the COVID-19 pandemic and persistently weak investment and productivity.
Unemployment will also increase and will be at a maximum of 5.0% in late 2023 and early 2024, Compared to the current 3.4%, there is an important difference, said the CBI. UK inflation hit a 41-year high of 11.1% in October, slashing consumer demand, and the CBI predicts it will fall slowly, averaging 6.7% next year and 2, 9% in 2024.
The CBI’s GDP forecast is less bleak than that of the UK government’s Office for Budget Responsibility, which last month forecast a 1.4% decline by 2023. But the CBI forecast is in line with the Organization for Economic Cooperative and Development (OECD), which expects Britain to be Europe‘s weakest performing economy after Russia next year.
The CBI asked the government to make the work visa system more flexible post-Brexit Britain, end what it sees as an effective ban on building wind turbines on land and give greater tax incentives for investment. “We will see a lost decade of growth if action is not 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,” Danker said.
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