Business group the British Chambers of Commerce has predicted a recession for the British economy this year, along with soaring inflation.
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The business group also predicted that inflation will reach 14% in the fourth quarter of this year, up from a previous forecast of 10%.
The BCC predicts that the British economy will grow in 2023, but only slightly, by 0.2%, with a slow increase to 1% in 2024.
The BCC blamed global economic outlook, rising energy costs and a decline in household spending and real wages, sparked by the Covid pandemic and the war in Ukraine.
British inflation ‘back to 2% by 2024’
The BCC predicts that inflation will finally return to the Bank of England’s target of 2% in 2024.
Alex Veitch, Director of Policy at the British Chambers of Commerce, said: “Our latest quarterly economic forecast will not be of any comfort to either consumers or businesses.
“The extreme inflationary pressures already present are only likely to increase as we head towards Christmas; with the UK economy already thought to be in recession. Tackling these pressures must be at the top of the new Prime Minister’s inbox when they take up their position next week.
“With prices spiralling out of control, they are expected to race ahead of earnings growth by a ratio of 3:1 in Q4 2022. This will undoubtedly impact consumer confidence, another key concern for businesses.
“Action is needed now, and the BCC has set out a comprehensive plan for Government to provide vital support to firms.
“Along with taxation and labour measures, the BCC business support plan includes key asks to help businesses with spiralling energy costs. These include Covid-style support by introducing a Government Emergency Energy grant, a temporary cut in VAT on energy bills to 5% to reduce costs for firms and increased regulation of the energy market for businesses by Ofgem.
Interest rate rises on cards
Last month, Goldman Sachs warned that Inflation could hit 22.4% in 2023 if prices for natural gas remain as high as they currently are.
The figure is considerably higher than recent forecasts by Citi and the Bank of England, which predicted that inflation could hit 18.6% and 13% respectively.
The Bank of England’s Monetary Policy Committee is due to have its next interest rate meeting on September 15.
The National Institute of Economic and Social Research warned last month that the Bank of England would need to raise interest rates to 3% to bring down inflation.
Another 21 economists suggested that the bank would raise interest rates by 0.25% in September – after a 0.5% raise in August.
British consumer price inflation rose to 10.1% in July, up from 9.4% in June, in the highest figure since February 1982, according to the Office of National Statistics.
