UK Risks Stagnation And Recession, Business Group Warns

The Confederation of British Industry (CBI) warned on Monday that the UK economy is certain to stagnate next year and might easily enter recession as a result of rising inflation, David Milliken reported for Reuters.

Photo Insert: Despite 37 billion pounds ($46 billion) in cost-of-living assistance measures from the British government, real disposable earnings are expected to fall 2.2 percent this year.

The CBI is the third major body to cut its growth forecasts for Britain in the past week, following a downgrade from the British Chambers of Commerce and a warning from the Organization for Economic Co-operation and Development (OECD) that Britain had the weakest outlook of any major economy bar Russia.

"Let me be clear – we're expecting the economy to be pretty much stagnant. It won't take much to tip us into a recession. And even if we don't, it will feel like one for too many people," CBI director-general Tony Danker said.

Despite 37 billion pounds ($46 billion) in cost-of-living assistance measures from the British government, real disposable earnings are expected to fall 2.2 percent this year, the greatest drop since records began in the 1950s, according to the CBI.

The CBI expects that the UK economy would grow by 1.0 percent next year, down from a previous forecast of 3.0%. The CBI's prediction of 3.7 percent growth for 2022 represents a favorable comparison to decreased output in 2021, when enterprises were subjected to COVID-19 limitations for the majority of the year.

The CBI encouraged the government to commit to reinstating a significant tax break for corporate investment that is set to expire, as well as to refrain from taking unilateral action in a dispute with the European Union (EU) over Northern Ireland's post-Brexit trade regulations.

"This is a tough set of statistics to stomach. War in Ukraine, a global pandemic, continued strains on supply chains – all preceded by Brexit – has proven to be a toxic recipe for UK growth," CBI chief economist Rain Newton-Smith said.

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