Managine director of Cumbria Chamber of Commerce has said that business and households are 'facing an extended period of real challenge.'

The British Chambers of Commerce (BCC) expects the UK economy to remain in recession for five quarters before an anaemic recovery in 2024, but inflation has likely peaked at 11%.

The BCC forecasts the economy will not return to growth until quarter 4 2023 and that UK inflation is expected to be 11 per cent in 2022 and to slow to five per cent by the end of 2023.

The economy will grow in 2024 say the BCC but the recovery will be weak as business investment, exports and household consumption all remain subdued.

In the immediate term, the BCC is now forecasting a five-quarter recession for the UK economy, which began in quarter 3 2022.

The annual expectation for GDP growth in 2023 is now -1.3%, broadly in line with the OBR and Bank of England’s predictions.

However, unlike the Bank of England, the BCC expects the economy to grow in 2024, albeit at 0.7%, which is around half of the OBR’s forecast.

A key contributor to the 2023 economic contraction is a sharp fall in household spending as consumers face rising energy costs, falling real wages, frozen income tax allowances and higher mortgage payments.

A poor outlook for the global economy means exports are also likely to fall, although they will be outstripped by a sharper decline in imports.

The mini-budget in September 2022 is expected to have had a long-term impact on borrowing costs for both businesses and consumers.

Alongside the effect of changes in corporation tax and business rates on already dwindling business confidence, this is likely to lead to a 3% contraction in business investment in 2023.

Suzanne Caldwell, Managing Director of Cumbria Chamber of Commerce said: “The outlook remains concerning, with both businesses and households facing an extended period of real challenge. And there’s a real risk that the economic situation could be worse than we’re forecasting.

“It’s crucial that the Government acts positively in the March Budget, and ideally before that to support businesses and enable them to invest and move forward with confidence.”

 

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