Business leaders have warned action is needed to avoid a ‘lost decade of growth’ as forecasts were sharply downgraded.
The Confederation of British Industry (CBI) estimates Britain’s gross domestic product will shrink by 0.4 per cent next year, down from predictions of 1 per cent growth.
While inflation was expected to have peaked in October at 11.1 per cent, the CBI estimated it will still be at 3.9 per cent at the end of 2023. As a result, it predicted a ‘year-long decline’ in consumer spending, while investment from businesses will also fall to a point where it is 9 per cent below pre-pandemic levels at the end of 2024.
Hard hitting: The CBI said longer-term weaknesses in productivity and business investment appeared to be ‘bedding in’
‘Britain is in stagflation – with rocketing inflation, negative growth, falling productivity and business investment,’ said CBI director general Tony Danker.
He added that firms were expected to pause investment next year and called on the Government to ‘use levers of growth’ to ensure a recession was ‘as short and shallow as possible.’
He said: ‘We will see a lost decade of growth if action isn’t taken… There’s no time to waste.’
Meanwhile, the CBI’s lead economist Alpesh Paleja said longer-term weaknesses in productivity and business investment appeared to be ‘bedding in’.
The CBI also noted that demand for workers was showing ‘early signs’ of softening, suggesting businesses were putting a pause on hiring. As a result, it predicted unemployment would rise ‘modestly’ next year, peaking at around 5 per cent.
