UK recession to be worse than previously thought – EY Item Club
(News of the Alliance) – The recession that experts predict is coming to the United Kingdom may be twice as bad as previously thought, according to economists who work for the EY consultancy.
Faced with a worsening situation, less government support, and higher taxes, experts said they thought each of the next three years could be worse than they had expected in the past.
Just three months ago, the EY Item Club predicted a 0.3% decline in gross domestic product this year, followed by 2.4% growth next year and a 2.3% increase in 2025.
But in an updated forecast released on Monday, they predicted a decline of 0.7% this year, followed by growth of 1.9% and 2.2% in the next two years.
“The UK’s economic outlook has become gloomier than predicted in the autumn, and the UK may already be in what has been one of the most anticipated recessions in living memory,” said the president of the EY UK, Hywel Ball.
But EY said that while the recession may cut deeper than previously thought, it will not necessarily last longer than previous forecasts.
It is not yet clear whether the UK is already in recession. A recession is defined as two consecutive quarters of GDP contraction.
The economy has already contracted in the third quarter of last year. But GDP figures released last week showed the economy grew unexpectedly in November, meaning some economists think the fourth quarter could be positive.
But regardless, the UK is expected to reach recession this year and shrink during the first half before returning to growth during the summer.
The recession will probably also be less damaging to the economy than those in the 80s, 1990s and 2000s, EY said.
“The one silver lining is that, even though it’s a deeper recession than previously predicted, it won’t necessarily be a longer one,” Ball said.
“The economy is still expected to return to growth during the second half of 2023 and has been spared any new significant external shocks in the last three months from energy prices, Covid-19 or geopolitics. Meanwhile, ir -the headwind for activity over the past year – high and rising inflation – may be starting to retreat, while energy prices are also falling.”
Economists predict inflation will hit 7.2% this year on average, including a big jump when the government’s energy support scheme becomes GBP500 less generous from the start of April.
By August Graham, PA Business Reporter
Copyright 2023 Alliance News Ltd. All rights Reserved.