Market News

(Bloomberg) -- UK economic growth is grinding to a halt as the cost of the living crisis escalates, a leading business lobby warned.

The British Chambers of Commerce predicted output will be barely higher in the fourth quarter than it was at the end of 2021, with consumers and businesses set to rein in spending as taxes climb and inflation rises toward 10%. 

In a report published late Wednesday, the BCC said it sees the economy stagnating in the second and third quarters, and contracting slightly in the final three months of the year. For 2023 as a whole, GDP will grow just 0.6%, it said. 

The grim outlook will add to fears that the UK is at risk of falling into recession as soaring prices eat into living standards for households and drive up the costs that companies have to absorb. 

Inflation hit a 40-year high of 9% in April and the rate is expected to peak in October, when a further sharp rise in energy bills is projected.

“Our latest forecast indicates that the headwinds facing the UK economy show little sign of reducing, with continued inflationary pressures and sluggish growth,” said Alex Veitch, director of policy at the BCC, which represents tens of thousands of firms that together employ 6 million people.

The forecasts are more downbeat than the average. On balance, economists surveyed by Bloomberg last month expected growth to resume in the second half following a stagnant second quarter.

The BCC said consumer spending and business investment are set to grow less this year than previously forecast, and barely expand at all in 2023. Veitch said the downgrade to corporate spending was “especially concerning” and urged the government to take urgent action to incentivize investment.