Britain’s economy is on track to shrink 0.4% next year as inflation remains high and companies halt investment, with depressing implications for long-term growth, the business industry confederation forecast on Monday.
Tony Danker, director general of the CBI, said, “The UK is suffering inflation – with rocket inflation, negative growth, falling productivity and business investment. Companies see potential growth opportunities but … headwinds will put them off investing in 2023.” Gotta stop.”
The CBI’s forecast marks a sharp decline from its previous forecast in June when it predicted growth of 1.0% for 2023, and that gross domestic product (GDP) would return to its pre-COVID level by mid-2024. Does not expect to return to the level.
Britain has been hit hard by a jump in natural gas prices following Russia’s invasion of Ukraine, as well as an incomplete labor market recovery following the COVID-19 pandemic and persistently weak investment and productivity.
The CBI said unemployment would rise to 5.0% in late 2023 and early 2024, from 3.6% at present.
British inflation hit a 41-year high of 11.1% in October, a sharp slump in consumer demand, and the CBI forecasts it will be slower to fall, averaging 6.7% next year and 2.9% in 2024.
The CBI’s GDP forecast is less bleak than that of the British government’s Office for Budget Responsibility – which last month forecast a decline of 1.4% for 2023.
But the CBI’s forecast is in line with the Organization for Economic Co-operation and Development (OECD), which expects Britain to be Europe’s weakest performing economy next year bar Russia.
The CBI forecasts that business investment will be 9% below its pre-pandemic level at the end of 2024, and output per employee will be 2% lower.
To avoid this, the CBI called on the government to make Britain’s post-Brexit work visa system more flexible, end the effective ban on building onshore wind turbines, and provide more tax incentives for investment.
Denker said, “If action is not taken, we will see a lost decade of growth. GDP is a simple multiple of two factors: people and their productivity. But we don’t have the people we need, nor the productivity.” “