Proactive Investors - The Confederation of British Industry (CBI) has warned the UK’s economy has fallen into recession that will last until the end of next year.
In its latest economic forecast, the CBI warned that the prime minister and chancellor must do more to boost long-term growth, having stabilised financial markets.
With inflation mounting, the CBI has slashed its forecast for growth in 2023 and predicted that UK GDP will shrink by 0.4% next year, down from 1% growth expected before.
The economy is likely to have fallen into a recession in quarter three 2022, when GDP shrank by 0.2%, the CBI said, adding they expect the recession to last until the end of 2023.
The CBI forecast a return to growth in 2024 of 1.6% but said by the end of its forecast, UK GDP will remain 8% below its pre-Covid trend from 2010 to 2019, and 27% below its pre-financial crisis trend.
High inflation is at the heart of weaker economic activity and the CBI forecast that pricing pressures will “remain significantly above the Bank of England’s 2% target next year, likely to end 2023 at 3.9%.”
Tony Danker, CBI director-general, warned “Britain is in stagflation – with rocketing inflation, negative growth, falling productivity and business investment. Firms see potential growth opportunities but a lack of 'reasons to believe' in the face of headwinds are causing them to pause investing in 2023.”
“Government can change this. Their action or inaction to support growth and investment will be a key determinant of whether recession is shallow or deep," he said.