Testing time as quarterly growth dries up

June 08, 2022

Quarterly eeconomic growth should stop this year before diving briefly negative territory as global events continue to weigh heavily on Great Britain economy.

UK Economic Outlook – 2022

UK Chambers of Commerce have lowered their expectations for UK GDP growth for 2022 at 3.5% (from 3.6%) against one deteriorating economic outlook. He’s waiting now the The inflation rate in the United Kingdom will reach 10% in the fourth quarter of 2022, comfortably outpacing average revenue growth. The Hincreased economic uncertainty and rising costs should also considerably weaken business investment, with growth of 1.8% forecast in 2022, down sharply from the 3.5% of the previous forecast.

GDP growth

Growth expectations in 2022, at 3.5%, are now less than half of the 7.5% growth recorded last year. Quarter-on-quarter GDP is expected to stagnate, with no growth expected in the second and third quarters before contracting by 0.2% at Q4. This negative outlook reflects a combination of soaring inflation, weak business investment, tax hikes and global economic shocks. initially caused by Covid and then aggravated by the war in Ukraine. Annual economic growth in the UK is expected to slow sharply to 0.6% for 2023 before the recoveryuhslightly to 1.2% in 2024.

Consumer spending is now expected to rise 4% in 2022, down from the first quarter forecast of 4.4%. This reflects the historically high pressure on real household incomes, with inflation far exceeding the expected 5% growth in average incomes for the year.

Investment

business investmentment is expected to grow by 1.8% in 2022, a significant downward revision from the previous forecast of 3.5%. The downward revision reflects heightened political and economic uncertainty and growing cost pressures that limit the ability of small businesses to invest. The BCCs survey data for business investment have shown no signs of recovery since the onset of the Covid pandemic.

Inflation

Businesses and consumers are facing unprecedented inflationary pressures from rising raw material costs, rising energy price caps, and upward pressures on energy and fuel prices. raw materials. The The consumer price index (CPI) inflation rate is expected to reach 10% in the fourth quarter of 2022. This would be the highest since CPI records began in their current form in 1989. CPI inflation should finally fall back to the Bank of England’s 2% target by the end of 2024. At the same time, the Bank of England interest rate is expected to rise to 2% in 2022 and 3% in 2023. This represents significant changes from the 1% and 1.5% rates previously forecast in the first trimester.

Commenting on the forecasts, Alex Veitch, Policy Director to the British Chambers of Commerce, said:

“Our latest forecasts indicate that the the headwinds facing the UK economy show few signs of reduce with continued inflationary pressures and slow growth. The war in Ukraine came just as the UK was starting a Covid recovery; additional pressure on corporate profitability.

“Tit predicts a decline in business investment is of particular concern. It is vital that urgent action is being taken here, and we have meaningful conversations with the government on this subjects review of depreciation and other Strategies to encourage businesses to invest.

“With inflation expected to outpace wages, we are concerned that lower consumer spending would further impact businesses.are and stunt growth. We expect that if trends continue, inflation will only return to the Bank of England’s target rate at the end of 2024, implying a prolonged period of difficulty for the UK.

” In this contextthe government must put in place stable and supportive policies that help businesses pull the UK out of this economic quagmire. Companies must have the confidence to invest, only then can they drive the growth the economy desperately needs.

Key points of the forecast:

  • UK GDP growth the forecast for 2022 is 3.5%, 0.6% in 2023 and 1.2% in 2024
  • Next Q1 2022 growth of 0.8%, quarterly GDP growth is plan to stop with zero growth in T2 and T3, before a contraction of 0.2% in T4 2022.
  • Household consumption growth of 4% is expected in 2022, growth of 0.6% for 2023 and 1.2% in 2024.
  • Business investment the forecast is to grow by 1.8% in 2022 before more … than halved to 0.8% in 2023, in the context of the end of the super deduction and the increase in corporate tax, and then amount to 1.5% in 2024
  • BCC is waiting export growth of 3% in 2022, 2.3% in 2023 and 1.6% in 2024, compared to import growth of 6.9%, -2.7% and 1.seven%
  • BCC is waiting UK unemployment rate of 3.8% in 20223.9% in 2023 and 2024
  • CPI inflation should peak at ten% in Q4 2022, before softening to 30.5% by the end of 2023. Inflation set to return to Bank of England’s 2% target by Q4 2024
  • British civil servant interest rate should go up to 2% in the fourth quarter 2022 and then to 3% in Q4 2023finishing 2024 at the same level.

More details on the forecast can be found here.