December 8

UK Faces A Decade Of Lost Growth

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The UK economy looks set to shrink 0.4% next year as high inflation persists and companies withold investment to weather the broader economic headwinds, according to a warning from the Confederation of Business Industry (CBI) on Monday.

The report says that Britain is already in a “short and shallow recession,” which will drive business investment 9% below 2019 levels, as it takes productivity 2% below the pre-pandemic trend-line by the end of 2024. The report noted the extended weak productivity and investment, “doesn’t bode well for the country’s potential to grow.”

The report predicted inflation, which struck a 41 year high of 11.1% in October, would average 6.7% in 2023, and 2.9% in 2024. It also predicted the UK would endure the second worst recession among major nations, after Germany.

CBI Director-General Tony 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’ in the face of headwinds are causing them to pause investing in 2023.”

The CBI recommended Britain create more flexibility in its post-Brexit work visa system, end the effective ban on the construction of onshore wind turbines, and increase the tax incentives for investment.

The lobbying group says the government needs to structure a plan around increasing productivity and increasing the labor supply, given the UK is presently the only economy right now with fewer people working in it compared to before the pandemic.

Danker emphasized, “We will see a lost decade of growth if action isn’t taken. GDP is a simple multiplier of two factors: people and their productivity. But we don’t have people we need, nor the productivity.”

The Daily Financial Trends 


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