Britain’s economy is expected to shrink by around 0.2% each quarter from October through until June next year, economists have warned.
The prolonged economic decline will result in a 0.3% fall in gross domestic product (GDP) for 2023 as a whole, the EY Item Club predicted in its autumn forecast.
The economic forecasting group has significantly downgraded its previous summer forecast which estimated the economy would grow by 1% in 2023.
UK economy facing recession
The likelihood that the UK economy will face a recession until the middle of next year is due to a combination of factors. High energy prices, surging inflation, rising interest rates and global economic weakness.
The Chancellor @Jeremy_Hunt will make a statement this morning, bringing forward measures from the Medium-Term Fiscal Plan that will support fiscal sustainability.
A statement to @HouseofCommons will follow this afternoon.
Read more: https://t.co/iA4DkquxaP pic.twitter.com/d29N5vaxrC
— HM Treasury (@hmtreasury) October 17, 2022
An economy enters a technical recession when its GDP falls for two or more consecutive quarters.
However, the risk of a severe downturn has been reduced by the Government’s energy bills cap, EY Item Club said, meaning that it will not be as bad as previous recessions.
Also, when high inflation eases, the weaker pound boosts exports and the Bank of England’s interest rate hikes end, GDP should return to growth in the second half of 2023, EY said.
The economy is then expected to expand 2.4% in 2024 and 2.3% in 2025.
But the group warned that there is a risk that growth could be dragged down by further economic shocks.
Hywel Ball, EY’s UK chair, said: “There’s no doubt the UK economy faces a difficult period ahead, with global headwinds adding to domestic pressures.
“The silver lining is that the Government’s intervention on energy bills is expected to limit the extent of the downturn, while ONS…
Source : times
