UK economic growth is expected to halve this year amid soaring inflation, major
tax rises, and global shocks including Russia's invasion of Ukraine, warns the
British Chambers of Commerce (BCC).
The BCC has downgraded its expectations for UK GDP growth in 2022 to 3.6% from
4.2% in its previous forecast in December 2021. This would be less than half the
growth of 7.5% recorded last year.
It says business investment is forecast to grow at 3.5% in 2022, down from the
previous forecast of 5.1%.
The BCC says that rising raw material costs, the increase in the energy price
cap, the reversal of the hospitality VAT cut and upward pressure on energy and
commodity prices from the impact of Russia's invasion of Ukraine will lift
inflation.
The business group forecasts inflation reaching a peak of 8% in Q2 2022, the
highest rate since July 1991. The BCC also projects that UK interest rates will
double over the course of this year, from 0.5% to 1%.
Suren Thiru, Head of Economics at the BCC, said:
'Our latest outlook suggests a legacy of COVID and Brexit is an increasingly
unbalanced economy with a growing reliance on household spending to drive
growth. Such economic imbalances leave the UK more exposed to economic
shocks and reduces our productive potential.'
Internet link: BCC website