Moneyfacts.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfacts.co.uk will always be from email@example.com. Be Scamsmart.
Rising inflation, upcoming tax increases, and geopolitical shocks will all contribute to a slower recovery from the pandemic.
Britain’s economic recovery from the COVID-19 pandemic will halve this year, according to British Chambers of Commerce (BCC).
The business lobby downgraded its UK Gross Domestic Product (GDP) growth to 3.6% in its Quarterly Economic Forecast today, after expecting it to expand as much as 4.2% in December. Significantly, this latest predicted figure is less than half the 7.5% growth seen last year.
“Our latest forecast signals a significant deterioration in the UK’s economic outlook,” said Suren Thiru, Head of Economics at BCC.
Much of this can be owed to escalating inflation, new tax hikes, and “global shocks”.
“The UK economy is forecast to run out of steam in the coming months as the suffocating effect of rising inflation, supply chain disruption and higher taxes weaken key drivers of UK output, including consumer spending and business investment,” said Thiru.
This is also expected to have an impact on consumer spending. Despite expecting consumer spending to grow at 6.9% in 2022, the BCC has now revised this figure to 4.4%.
“Our latest outlook suggests a legacy of COVID, and Brexit is an increasingly unbalanced economy with a growing reliance on household spending to drive growth. Such economic imbalances leave the UK more exposed to economic shocks and reduces our productive potential,” said Thiru.
In addition, the BCC said it expected inflation to outpace wage growth until the second quarter of 2024, which will put further pressure on consumer spending in the mid to longer-term.
While consumers will feel the effect on their wallets, businesses will be worried about the dwindling interest in business investment.
With the BCC previously forecasting consumer spending to grow at 5.1%, this has now been revised to 3.5% for 2022. This downgrade can be attributed not only to rising costs and taxes, but also a loss in confidence over the UK and global markets since Russia’s invasion of Ukraine.
Despite this, the Bank of England’s Monetary Policy Report in February forecast business investment growth to 13.75%, a vast difference from the BCC’s predictions.
Businesses will also feel the effect of the BCC’s forecast inflation rise of 8% in the year’s second quarter. Of particular concern to business owners, this rise can be attributed to rising prices of raw materials.
“Coming hot on the heels of two years of a pandemic-induced squeeze on cashflow and investment plans, it is clear Government must do more to support UK business and the wider economy,” said Hannah Essex, Co-Executive Director the BCC.
For the longer-term, the BCC expects GDP to slow further next year at 1.3% before hitting 1.2% in 2024.
Due to Brexit ramifications, UK exports are priced in to remain £25.5 billion lower than their pre-pandemic levels at the end of 2024.
As a further hit on businesses, the BCC forecast business investment to remain 6% lower than its pre-pandemic level by the end of 2024.
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.