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UK economic growth will “grind to a halt” this year before briefly falling into negative territory, according to the British Chambers of Commerce.
The business group downgraded its 2022 growth forecast from 3.6% to 3.5%, and said inflation would reach 10% in the last quarter – far higher than average wage rises.
Investment growth expectations have also been slashed for this year, from 3.5% to 1.8%, said the BCC report.
The bleak outlook follows a warning from one of the world’s leading economic authorities that Britain’s growth next year will be worse than any G20 country except Russia.
There will be no GDP expansion at all in 2023, according to the OECD (Organisation for Economic Co-operation and Development).
The group said the UK was threatened by rising interest rates and taxes, as well as the high inflation that’s leading surging petrol prices and energy costs.
It’s an assessment supported by the BCC.
Alex Veitch, the group’s director of policy, said “the headwinds facing the UK economy show little sign of reducing”.
“The war in Ukraine came just as the UK was beginning a COVID recovery, placing a further squeeze on business profitability,” he said.
“The forecast drop in business investment is especially concerning.
“It is vital that urgent action is taken here, and we are having constructive conversations with the government about its review of capital allowances and other policies to incentivise business investment.”
‘Stable and supportive’ policies needed
Mr Veitch said growth could also be hit by falling consumer spending, caused by wage increases lagging behind rising costs.
“We forecast that, if trends continue, inflation will only return to the Bank of England’s target rate at the end of 2024…” said the BCC policy chief – who called for “stable and supportive policies” to help firms.
Shadow business secretary Jonathan Reynolds said Tory failure was “hampering British business”.
“Labour would grow our economy with our plan to buy, make, and sell more in Britain, our climate investment pledge, and tax cuts for small businesses now to get our economy firing on all cylinders,” he said.
A Treasury spokesperson said the UK had the fastest growth in the G7 last year and that unemployment numbers were the lowest in nearly 50 years.
“While we can’t insulate the UK from global pressures entirely, we have a plan for growth, and are supporting people with the cost of living,” they said.
“Eight million of the most vulnerable families will receive at least £1,200 of direct payments this year, with all families receiving £400. We’re also investing in capital, people and ideas to boost growth and living standards in the years to come.”
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