UK Economic Outlook – 2022
The BCC’s economic outlook worsened, so the organization reduced their expectations for UK GDP growth in 2022.
The UK’s inflation forecast has been raised and is now estimated to be 14% in Q4 2022.
The BCC expects the UK economy to enter recession in 2022, with negative economic growth for the second, third, and fourth quarter.
Short-term GDP expected to go into recession
Short term, the average citizen might see a recession in the UK’s economy as it contracts by three quarters between Q2 and Q4 2022.
The annual expectations for GDP growth are also declining, with an expectation of growth at 3.3% in 2023 despite an increase to 1% in 2024.
Unfortunately, the predictions for GDP growth are not as high because of a decline in global economic conditions and weakening international economies.
The issues outside the country should be further compounded by factors within, such as Covid-19, which has led to poor investment and business confidence.
Inflation to peak at 14%
Businesses will continue to be burdened with high costs of business as inflation rates are expected to increase.
In Q4 2022, average CPI is expected to reach a peak of 14%, up from the previous, already high predicted rate of 10%. The CPI’s rate will decrease to 5% in 2023 and return 2% by 2024.
The Bank of England’s interest rates are expected to increase from 2% in 2022 to 3% in 2023 and 2024, with inflation outpace growth by over 3:1 in Q4 2022. Average earnings are expected to increase by 4.5% in Q4 2022.
Investment and recovery expected to be anaemic
There will be growth in business investments in the coming years, but not at a predictable pace.
It is expected that there will be more spending on building construction than on machinery or equipment.
There will be lesser growth of investments starting in 2023, after it reached a peak in 2022.
Overall investment is expected to grow by 4% this year and then by 1.1% in 2024.
Consumer spending is now forecasted to grow at 3.8% in 2022, a fall from the 4% predicted earlier this year.
Commenting on the forecast, Alex Veitch, Director of Policy at the British Chambers of Commerce, said:
The UK is already experiencing extreme inflation and the forecast will not improve it either.
The new Prime Minister must address this immediately to prevent the economy from going into recession.
Recent projections show that inflation is not only affecting businesses, but also the ability of some to keep their doors open.
23% of those surveyed by the BCC in January were considering scaling down or even closing due to the rising costs.
Prices are expected to spike and will likely outpace economic growth. This will have a negative impact on consumers due to the escalation of prices, which in turn will hurt businesses.
The BCC has provided a plan for the government to follow in order to aid businesses.
Along with changes to how we tax businesses, changes in labour legislation and reduced labour costs, the BCC business support plan includes strategies like Covid’s-style emergency energy grants.
According to the research and forecast of Copymatic, businesses are facing problems that need to be solved by the government. Time is running out, so there needs to be a solution as soon as possible.
Key points in the forecast:
- UK GDP growth forecast for 2022 is 3.3%, 0.2% in 2023 and 1% in 2024
- Following a contraction of growth in Q2 2022 by 0.1%, quarter-on-quarter GDP growth is forecast to continue to decline in Q3 by 0.1% and Q4 by 0.3%, before a slight increase in growth of 0.2% in Q1 2023.
- Household consumption forecast is for growth of 3.8% in 2022, growth of 0.3% for 2023 and 1.1% in 2024.
- Business investment forecast is to grow by 2.7% in 2022 before more than quartering to 0.6% in 2023, and then rising to 1.2% in 2024
- BCC expects export growth of 2.3% in 2022, 1.8% in 2023 and 1.2% in 2024, compared to import growth of 7.7%, -3.8% and 1.6%
- BCC expects UK unemployment rate of 3.8% in 2022, before rising to 4.1% in 2023 and 2024
- CPI inflation is forecast to peak at 14% in Q4 2022, before falling to 5% by the end of 2023. Inflation is expected to drop back to the Bank of England’s 2% target by Q4 2024
- UK official interest rates are expected to rise to 2% by Q4 2022 and then to 3% in Q4 2023, ending 2024 at the same level