Shocking predictions show that the only major country projected to have lower growth than the UK in the next 12 months is Russia - which has been hit by massive sanctions over the Ukraine war. Economic growth is expected to “grind to a halt” this year before falling briefly into negative territory, and inflation will hit 10%.
The UK will grow by 3.6% in 2022 before posting zero growth in 2023, according to the Paris-based thinktank the Organisation for Economic Co-Operation and Development (OECD). The British Chambers of Commerce (BCC) also said global events continue to weigh heavily on the economy, as it downgraded its expectations for growth for 2022 to 3.5%, from a previous 3.6%.
The BCC said it now expects inflation to reach 10% in the final quarter, “comfortably outpacing” average earnings growth. Business investment is set to be hit, with 1.8% growth predicted this year, down from 3.5% in the previous forecast, said its report.
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BCC director of policy Alex Veitch said: “Our latest forecast indicates that the headwinds facing the UK economy show little sign of reducing, with continued inflationary pressures and sluggish growth. “The war in Ukraine came just as the UK was beginning a Covid recovery, placing a further squeeze on business profitability.
“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.
“With inflation forecast to race ahead of wages, we are concerned about a dip in consumer spending which would further impact businesses and hamper growth. “We forecast that, if trends continue, inflation will only return to the Bank of England’s target rate at the end of 2024, implying a prolonged period of difficulty for the UK.
“Against this backdrop, the Government must put in place stable and supportive policies that help businesses pull the UK out of this economic quagmire. Firms must be given confidence to invest; only then can they drive the growth the economy so desperately needs.”
Jonathan Reynolds, shadow business secretary, said: “The Conservatives’ failure to grow our economy is hampering British business with planned business investment reportedly down by half. 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.
“British firms don’t have time for Conservative drama and division, they need a Government on their side. Labour backs British business.”
A Treasury spokesperson said: “The UK had the fastest growth in the G7 last year, and our unemployment rate is the lowest it’s been in nearly 50 years - but we understand that people are struggling with rising prices. 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.
“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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