UK economic growth will “grind to a halt” this year, before turning negative, the British Chamber of Commerce has warned.
In a forecast released yesterday (June 9), the business group said it had downgraded its expectations for GDP growth this year from 3.6 per cent to 3.5 per cent, against a “deteriorating” outlook.
The BCC also expects inflation to hit 10 per cent in the fourth quarter of the year, which it says will comfortably outpace average earnings growth.
Business investment in the UK is also expected to weaken, with the BCC slashing their forecast from 3.5 per cent to 1.8 per cent growth.
Director of policy at the BCC, Alex Veitch, said this 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,” he added.
Veitch said the forecasted drop in business investment is especially concerning, and said it is vital that “urgent action” is taken here.
“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.”
The rate of inflation has overshot the Bank of England's 2 per cent target each month for over a year.
In May, price growth hit 9 per cent, a 40-year high.