UK faces stagnation and recession: Confederation of British Industry

The CBI predicts Britain's economy will grow 1.0 per cent next year, down from a previous forecast of 3.0 per cent. PHOTO: REUTERS

LONDON (REUTERS) - Britain's economy faces stagnation next year and could easily fall into recession, the Confederation of British Industry (CBI) warned on Monday (June 13) after it slashed its outlook for growth due to surging inflation.

The CBI is the third major body to cut its growth forecasts for Britain in the past week, following a downgrade from the British Chambers of Commerce and a warning from the Organisation for Economic Co-operation and Development (OECD) that Britain had the weakest outlook of any major economy bar Russia.

"Let me be clear - we're expecting the economy to be pretty much stagnant. It won't take much to tip us into a recession. And even if we don't, it will feel like one for too many people," CBI director-general Tony Danker said.

Households' real disposable incomes are on track to fall 2.2 per cent this year, the largest decline since records began in the 1950s, the CBI predicted, despite £37 billion (S$63.9 billion) of cost-of-living support measures from Britain's government.

The CBI predicts Britain's economy will grow 1 per cent next year, down from a previous forecast of 3 per cent.

The growth of 3.7 per cent forecast by the CBI for this year largely reflects a favourable comparison with depressed output last year, when businesses faced Covid-19 restrictions for much of the year.

The CBI urged the government to commit to replacing a generous tax break on business investment that is due to expire, and to avoid unilateral action in a dispute with the European Union over post-Brexit trade rules for Northern Ireland.

"This is a tough set of statistics to stomach. War in Ukraine, a global pandemic, continued strains on supply chains - all preceded by Brexit - has proven to be a toxic recipe for UK growth," CBI chief economist Rain Newton-Smith said.

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