Businesses are not investing, prices are rising and the economy is shrinking – a bleak economic picture that will continue into next year, Britain’s largest business group has warned.
The UK could even face a decade of lost economic growth if no action is taken, Confederation of British Industry (CBI) chief Tony Danker has said.
“We don’t have the people we need, nor the productivity,” said Mr. Danker.
The CBI expects the economy to contract by 0.4% next year.
This represents a downgrade from its previous forecast, with the lobby group saying the UK is suffering from “stagflation” – a combination of stagnation and rising prices.
The CBI, which represents 190,000 British companies, said Prime Minister Rishi Sunak and Chancellor Jeremy Hunt managed to stabilize markets after Liz Truss’ mini-budget.
But it said the UK was in recession and action was needed now to boost long-term productivity and economic growth.
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It called on the government to address labor shortages and find ways to “unlock” business investment.
“We have no time to waste … We can’t afford to have another decade of both stagnating,” added Mr. Danker.
At the group’s conference last month, he urged politicians to get “hands on” when it comes to using immigration to solve labor shortages and boost economic growth.
The government said the country is already in a recession, defined when an economy shrinks for two consecutive three-month periods. It is a sign that the economy is performing poorly, companies are often making less money and unemployment is rising.
Global factors are partly to blame as energy and food prices have skyrocketed this year due to the war in Ukraine and Covid.
However, the UK also faces significant labor supply challenges, as it is more difficult for small businesses to trade with Europe or hire workers due to Brexit, which ended the free movement of EU citizens coming to the UK and vice versa .
There will be “no New Year’s cheer for the economy,” the CBI added, with its latest forecast suggesting business investment will be 9% below pre-pandemic levels by the end of 2024.
There will also be a year-long contraction in consumer spending as pressure on household budgets continues, it said.
While inflation, which measures how the cost of living is rising over time, may have peaked, it said prices will still rise at a pace “well above” the Bank of England’s 2% target lies.
A Treasury spokesman said: “We have been honest that the UK economy is facing difficult times amid strong global headwinds and we are not alone in facing this challenge.”
He also pointed to measures announced in the recent Autumn statement, such as fixing the annual investment allowance at £1m from 1 April 2023 to encourage companies to invest in equipment and machinery, for example.
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