UK faces risk of stagnation and recession, warns CBI

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A woman holds British pound banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

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LONDON, June 13 (Reuters) – Britain’s economy risks stagnating next year and could easily slide into recession, the Confederation of British Industry (CBI) warned on Monday after it cut its growth outlook due to the surge in inflation.

The CBI is the third major body to cut its growth forecast for Britain last week, following a downgrade by UK Chambers of Commerce and a warning from the OECD that the Britain had the weakest outlook of all major economies except Russia.

“Let’s be clear – we expect the economy to be pretty much flat. It won’t take much to tip us into a recession. And even if we don’t, it will look like one for too many people,” CBI Director General Tony Danker said.

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Real household disposable income is set to fall 2.2% this year, the biggest drop since records began in the 1950s, the CBI has predicted, despite 37 billion pounds ($46 billion) in support measures at the British government’s cost of living.

The CBI expects the UK economy to grow by 1.0% next year, down from a previous forecast of 3.0%.

The 3.7% growth forecast by the CBI for 2022 largely reflects a favorable comparison with the drop in production in 2021, when companies faced COVID-19 restrictions for much of the year. .

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

“This is a tough set of statistics to digest. The war in Ukraine, a global pandemic, continued strains on supply chains – all preceded by Brexit – have proven to be a toxic recipe for growth. Britain,” said CBI chief economist Rain Newton-Smith. .

($1 = 0.8118 pounds)

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Reporting by David Milliken; Editing by Alex Richardson

Our standards: The Thomson Reuters Trust Principles.

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