The UK’s growth is expected to halve this year as Russia’s invasion of Ukraine adds to mounting cost pressures and dampened global confidence, according to a key British business group.
The British Chamber of Commerce forecasts UK GDP of 3.6% in 2022, down from its December outlook of 4.2% and less than half the 7.5% growth realised last year as the UK bounced back from Covid.
The group cuts its forecasts for both consumer spending and business investment, as it projected inflation to outpace wage growth until the second quarter of this year, and wider cost pressures and tax risers to dampen confidence.
The British Chamber of Commerce’s head of economics Suren Thiru said the UK economy was expected to “run out of steam” as new geopolitical storms added to inflation from a two-year period of heavy spending.
“Russia’s invasion of Ukraine is likely to weigh on activity by exacerbating the current inflationary squeeze on consumers and businesses and increasing bottlenecks in global supply chains.
“Our latest outlook suggests a legacy of Covid, and Brexit is an increasingly unbalanced economy with a growing reliance on household spending to drive growth. Such economic imbalances leave the UK more exposed to economic shocks and reduces our productive potential."
The unbalanced nature of the UK economy was reflected in forecasts that business investment would remain 6% below pre-pandemic levels and UK exports 13.7% lower, despite consumer and government spending projected to be 2.4% and 12.2% higher respectively.
The body’s co-executive director Hannah Essex urged Chancellor Rishi Sunak to tackle a “cost-of-doing-business crisis” by delaying a planned rise to National Insurance in April and introducing a temporary energy price cap.