UK economy to shrink in 2023 before rebounding; exports to fall: BCC

13 Mar '23

2 min read

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The British Chambers of Commerce (BCC) expects the UK economy to avoid a technical recession, but shrink by 0.3 per cent this year, before returning to growth next year. Inflation will slow to 5 per cent by the fourth quarter (Q4) of 2023. The economy will not return to its pre-pandemic size until Q4 2024, BCC forecast. A 4.5 per cent fall in exports is predicted across 2023.

Exports were stronger than expected in the second half of 2022. BCC research also shows that while overall export values have held up, many smaller companies are not reporting any improvements in their trading conditions.

In the immediate term, BCC is expecting Q1 2023 to see the gross domestic product (GDP) fall, before three quarters of flat or weak growth, leading to an overall contraction of 0.3 per cent for the year, BCC said in a release.

This is a slightly more optimistic outlook than predictions of either the Office of Budget Responsibility or the Bank of England (BoE).

BCC expects the economy to grow in 2024 at 0.6 per cent compared to the BoE’s forecast of 0.25 per cent shrinkage.

Despite a big drop in business confidence in Q3 2022, this now appears to have stabilised albeit at a lower level. Business investment has now returned to pre-pandemic levels, although it was not performing well then, BCC said.

BCC expects the UK unemployment rate to rise to 4.5 per cent in 2023, then 4.8 per cent in 2024 and then dipping to 4.1 per cent in 2025.

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