The United Kingdom is facing bleak economic predictions as business leaders predict shrinking GDP and other issues.
- The U.K. Confederation of Business Industry (CBI) revealed on Monday that the country’s economy is likely to shrink in 2023.
- The economy could shrink by 0.4%—compounded by high inflation, high energy costs, high unemployment, and struggling small businesses.
- The damage could position the U.K. as Europe’s weakest economy besides Russia, Reuters reports.
Why it’s Important
As we previously reported, the ongoing war in Ukraine has caused most of Europe into an economic spiral of high inflation and high energy costs. The U.K. is among the most affected countries with thousands of small businesses being negatively affected. The country is still feeling the effects of former Prime Minister Liz Truss’s attempts to address the economic crisis.
“Britain has been hit hard by a surge in natural gas prices following Russia’s invasion of Ukraine, as well as an incomplete labor market recovery after the COVID-19 pandemic and persistently weak investment and productivity,” says Reuters.
The CBI originally forecasted 1% growth in 2023 but lower GDP projections have soured projections. It is unlikely that the ongoing crises will end before mid-to-late 2024. It expects unemployment to rise to 5%.
It is predicting a slowdown in inflation to 6.7%, from its current peak of 11.1% in October, but other analysts are warning U.K. inflation could reach as high as 22.4%.
The Office for Budget Responsibility is forecasting even direr predictions of a 1.4% market shrinkage.
“Britain is in stagflation—with rocketing inflation, negative growth, falling productivity, and business investment. Firms see potential growth opportunities but … headwinds are causing them to pause investing in 2023. 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 the people we need, nor the productivity,” says CBI Director-General Tony Danker.