CBI expects UK recession to last until 2023 end

The weakness in household spending also weighs on other areas of the economy. In particular, business investment continues to disappoint, falling from mid-2023 onwards, hit by the recession and the government’s super deduction coming to an end, CBI said in a release.

The outlook improves in 2024, when the economy grows by 1.6 per cent, thanks to inflation falling back further and the squeeze on household incomes alleviating. The recovery in household spending also lifts business and residential investment.

High inflation is at the heart of weaker economic activity. CBI expects consumer price index (CPI) inflation to have peaked in October (at a 40-year high of 11.1 per cent), and to fall gradually over the coming year. But it will remain significantly above the Bank of England’s 2 per cent target over 2023, ending the year at 3.9 per cent, CBI noted.

But despite the return to growth, longer-term economic prospects remain lackluster, CBI said. Productivity remains subdued in CBI’s forecast; by the end of 2024, it expects output per worker to remain at 2 per cent below its already weak pre-COVID trend, and 19 per cent below a continuation of its pre-financial crisis trend.

Similarly, another bout of weakness in business investment leaves it still 9 per cent below its pre-COVID level at the end of 2024, CBI added.

Fibre2Fashion News Desk (DS)