UK’s economic growth to halve this year says British Chambers of Commerce
Britain’s economic growth will halve this year as a result of soaring inflation, hefty tax rises and the destabilising shock from the war in Ukraine, a leading business lobby group has warned.
In the first major forecast of the UK economy since the Russian invasion of Ukraine, the British Chambers of Commerce (BCC) said it expected an inflation rate of 8% to cut disposable incomes in 2022, putting the brakes on the recovery from the pandemic.
In its previous forecast, the BCC expected GDP to expand by 4.2%, but after a wide ranging review it said growth would fall to 3.6% – less than half the 7.5% expansion in national income seen last year.
The BCC said the size of the economy would surpass its pre-pandemic level over the next few months, but was likely to struggle as consumer confidence, which collapsed last month as the full weight of the cost of living crisis became clear, dropped further over the coming months.
Suren Thiru, head of economics at the BCC, said he now expected inflation to peak at 8% and interest rates to increase to 1.5%, adding to the burden on households and companies, already battered by two years of Covid.
“Our latest forecast signals a significant deterioration in the UK’s economic outlook,” he said.
He described the effects of rising inflation, supply chain disruption and higher taxes as having a suffocating effect on the UK economy that would see growth “run out of steam in the coming months”.
“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,” he said.
The downgrade largely reflects a deteriorating outlook for consumer spending and a weaker than expected rebound in
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