UK economic growth will "grind to a halt" this year before dipping briefly into negative territory as global events continue to weigh heavily on the UK economy, the British Chambers of Commerce warned.
The business network cut its expectations for UK GDP growth for 2022 to 3.5% (from 3.6%) and warned inflation will hit 10% in Q4 2022, far outpacing average earnings growth.
Headwinds including the Ukraine war and soaring inflation “show little sign of reducing,” according to Alex Veitch, BCC director of policy.
"It is vital that urgent action is taken here and we are having constructive conversations with the government about its review of capital allowances and other policies to incentivise business investment," he said.
"We forecast that, if trends continue, inflation will only return to the Bank of England's target rate at the end of 2024, [with] stable and supportive policies [needed] to help firms.”
This dreary outlook echoed that of the OECD’s on Wednesday after it predicted Britain’s growth in 2023 would be worse than all G20 countries excluding Russia, with no growth at all (read more).
The BCC said heightened economic uncertainty and rising costs are also expected to significantly weaken business investment, with 1.8% growth predicted in 2022, down sharply from 3.5% in the previous forecast.
Consumer spending is now forecast to grow at 4% in 2022, a fall from the 4.4% prediction in the first quarter. This reflects the historically high squeeze on real household incomes as inflation far outpaces the forecast 5% growth in average earnings for the year.