The UK economy will not return to growth until the fourth quarter of next year and recovery from there will be feeble, a leading business group has warned.
The British Chambers of Commerce (BCC) said the overall picture for 2024 shows an eventual return to growth but not at a level that will compensate for five quarters of shrinkage. The group is predicting gross domestic product (GDP) will decline by 1.3 per cent next year, driven in large part by a sharp fall in household spending.
Alex Veitch, director of policy at the BCC, said the "very real worry" is that the UK will be left behind by competitors as it emerges from recession.
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"But it is not too late to turn this around," he added. "With concrete action on infrastructure investment, skills, trade and green tech we can put the economy in a much stronger position.
"The next Budget, due in March 2023, will be a real acid test of whether the Government fully understands the scale of the problems ahead and is prepared to act."
The BCC said the UK – the only G7 economy that has failed to regain its pre-pandemic level of GDP – is likely to have grown by 4.2% in 2022. This is expected to be followed by a decline of 1.3% next year before growth resumes in 2024 at a pace of just 0.7%.
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Household consumption is forecast for growth of 4.7% in 2022 before shrinking by 2.3% in 2023, and growing 0.3% in 2024. Business investment is forecast to grow by 4.2% in 2022 before a 3% contraction in 2023, and then an increase of 1.4% in 2024.
September's disastrous "mini-Budget" is expected to have a long-term impact on borrowing costs for both businesses and consumers. Combined with dwindling confidence and changes in corporation tax and business rates, this will lead to next year's 3% contraction in business investment.
The BCC believes the upward spiral in inflation has peaked, but this "simply means prices will stabilise at a very high level".
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