Home Investing CBI says the UK is in a “short and shallow” recession

CBI says the UK is in a “short and shallow” recession

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The Confederation of British Industry (CBI) has cautioned that the UK economy is staring at a decade of missed growth unless action is taken on investment tax exemptions, the Northern Ireland convention, and the dwindling workforce.

The UK economy is already in a “short and shallow” recession

According to the CBI’s most recent projection, the UK already has entered a “short and shallow” downturn that could leave corporate investment 9% lower than 2019 levels by the end of 2024, with productivity 2% less than its pre-pandemic average.

According to CBI Director General Tony Danker, Britain appears to be backing away from the priorities outlined by Prime Minister Rishi Sunak in February at his Mais Lecture. The country is doing away with incentives to invest and drive innovation as well as giving up on any growth-oriented agenda.

Danker said,

Britain is in stagflation — with rocketing inflation, negative growth, falling productivity and business investment. Firms see potential growth opportunities but a lack of ‘reasons to believe’ are causing them to pause investing in 2023. Government can change this. We will see a lost decade of growth if action isn’t taken.

The economy will contract by 0.4% in 2023 as the rising cost of living hurts consumer purchasing power and interest rates increase to 4%. However, in 2024, the GDP is expected to rebound and expand by 1.6%.

Unemployment to increase by 500,000 in 2023

According to the CBI’s estimate, unemployment will increase by over 500,000 to 5% in 2023 from 3.6%, with inflation continuing to squeeze household incomes by 11.1% throughout next year and 2.6% over the target by the end of 2024.

Dunker added,

Britain fails to invest as much as it should compared to our G-7 competitors in capital, people, and ideas, and it was (Sunak’s) view that government needed to play a role in changing that. But the truth is, we still have no plan.

CBI indicates that the UK will be among the countries suffering the worst recessions, just behind Germany. The CBI said the weak business environment and productivity do not bode well with the UK’s potential growth. According to Danker, the government needs to take action to boost confidence and restore business confidence. In addition, there is a need for a plan to boost productivity and increase labour supply considering the UK is the only major economy with fewer people working relative to pre-pandemic.

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