British industry foresees difficult years for the domestic economy. “We will see a lost decade of growth if nothing is done,” CBI chief executive Tony Danker said on Monday. Economic performance depends on two things: people and their productivity. “But we don’t have the people we need, nor the productivity,” Danker said.
The industry association expects the UK economy to contract by 0.4% next year. Just six months ago it had forecast growth of 1.0%. “Britain is in stagflation – with rising inflation, negative growth, falling productivity and business investment,” Danker said. “Companies see potential growth opportunities, but headwinds are forcing them to halt investments in 2023.” Gross domestic product will only surpass the level it reached before the coronavirus pandemic again in mid-2024. The Organization for Economic Co-operation and Development (OECD) expects the UK to underperform most other European economies in 2023.
The CBI also expects unemployment to rise. The rate will increase from the current 3.6 to 5.0% in late 2023 and early 2024. The inflation rate, which hit a 41-year high of 11.1% in October, will drop to an average of 6.7% next year. In 2024 it should therefore be 2.9%.
The CBI projects that by the end of 2024 business investment will be 9% below pre-pandemic levels. To prevent this from happening, the government should make the work visa system more flexible after Brexit and create more tax incentives for investment.
