UK economy ‘will grind to a halt’ and then shrink, BCC forecasts

theguardian.com:

Britain’s economy will “grind to a halt” before shrinking in the second half of this year as soaring inflation and tax rises take their toll, according to forecasts from one of the UK’s leading business groups.

Consumers and business will pay a high price for Russia’s invasion of Ukraine and persistent delays to supplies from China, said the British Chambers of Commerce (BCC) as it downgraded its outlook for growth next year to 0.6%.

With petrol reaching a fresh high of £1.80 a litre and gas prices showing no signs of easing, the BCC said inflation was likely to hit 10% before the end of the year.

The gloomy forecast chimed with earlier analysis by the Organisation for Economic Co-operation and Development (OECD), though the Paris-based thinktank said the UK was on course for an even rockier ride in 2023.

Experts at the OECD said the UK’s growth rate was expected to go from the second-fastest-growing economy this year in the G7 group of industrial nations after Canada to the slowest-growing when GDP growth slows to zero next year.

Analysts said the forecasts were likely to spook consumers and depress the housing market, which has slowed markedly in recent months.

Consumer confidence has already fallen to record lows in response to an unprecedented cost of living squeeze that is expected to continue for the rest of the year despite a further £15bn of welfare cheques and energy subsidies announced by Rishi Sunak last month.

Danni Hewson, an analyst at the stockbroker AJ Bell, said reductions in growth forecasts that put the UK at the bottom of the industrialised world had put a downward pressure on shares in London.

“The housing market is cooling, the construction sector slowing and consumer confidence looking distinctly anaemic,”