The UK should still avoid a recession, although GDP growth is set to remain sluggish for the remainder of 2023 and into 2024, according to the EY ITEM Club’s new autumn forecast.
It expects the UK economy to grow 0.6% in 2023, up from the 0.4% growth projected in July’s Summer Forecast.
However, GDP growth expectations for 2024 have been downgraded slightly from 0.8% to 0.7%, as the impact of the recent interest rate rising cycle continues to feed through.
Inflation is expected to fall to around 4.5% by the end of 2023, before declining to the Bank of England’s 2% target in the second half of 2024.
Oil prices, frozen income tax thresholds, inflation, and a deteriorating labour market are all expected to put pressure on consumer spending.
But business investment growth prospects for 2023 have been significantly upgraded, despite the higher cost of debt.
The economy is still forecast to grow 1.7% in 2025 as lower inflation lifts real incomes and interest rates are cut.