FirstFT: CBI warns of year-long recession in UK
The UK will fall into a year-long recession in 2023 as the “stagflation” combination of rising inflation, negative growth and plummeting business investment weighs on the economy, according to Britain’s largest business group.
The CBI warned that gross domestic product would fall by 0.4 per cent in 2023, a downgrade from its previous forecast of 1 per cent growth set in June. It said consumer spending would drop throughout the year as inflation remained above the Bank of England target.
The lobby group gave a particular downbeat forecast on business investment, which it said would start to fall from the middle of next year when an existing “super deduction” tax allowance scheme designed to boost investment came to an end.
Business investment is expected to be 9 per cent below pre-Covid pandemic levels by the end of 2024 — equivalent to about £5bn.
CBI director-general Tony Danker warned: “[Companies] see potential growth opportunities, but a lack of ‘reasons to believe’ in the face of headwinds are causing them to pause investing.”
The economic outlook for the UK is among the weakest of the advanced nations covered by the CBI forecast, with only GDP in Germany set to fall at a slightly faster pace next year.
Five more stories in the news
1. Europe cuts gas demand by a quarter Provisional data from commodity analytics company ICIS showed gas demand in the EU was 24 per cent below the five-year average last month, following a similar fall in October, in the latest evidence that the bloc is succeeding in reducing its reliance on Russian energy since Moscow’s invasion of Ukraine.
2. War, weather to keep food prices high Adverse weather events and the war in Ukraine are set to keep food prices high despite signs of moderation in global commodity markets, economists and agriculture experts have warned. Costs are likely to remain well above pre-pandemic levels as war and droughts limit producers’ ability to increase supply.
3. EU vows to simplify aid rules to compete with Biden’s climate package The EU must “simplify and adapt” its rules on state aid to counteract the US’s $369bn climate package, European Commission president Ursula von der Leyen said yesterday in her first public response to Washington’s green energy subsidy. EU leaders have said the scheme risks “fracturing” transatlantic unity by luring European companies to relocate.
4. Court paves way for sale of Gupta’s Belgian steel plants Sanjeev Gupta could lose control of his steel plants in Belgium after a court in the city of Liege last week upheld a request by workers at his Liberty Steel subsidiary to start restructuring. The court appointed a legal representative to oversee the sale of two plants at Flémalle and Tilleur.
5. Report calls for crackdown on UK asylum seekers UK home secretary Suella Braverman has welcomed a report by a centre-right think-tank calling for a major crackdown on asylum seekers who come to Britain using illegal routes. The report says “if necessary” the UK should withdraw from the European Convention on Human Rights to tackle the problem.
The day ahead
Economic indicators S&P Global releases its November composite purchasing managers’ index for the EU, services PMI for Russia and composite PMI with Cips for the UK. In the US, ISM publishes its non-manufacturing PMI.
WHO meeting The World Health Organization convenes in Geneva to review a new pandemic accord.
Brussels bombing trial Belgium’s biggest criminal case, against suspects in the 2016 Brussels attacks that killed 32 people and left hundreds injured, goes to court.
St Nicholas Eve The Netherlands celebrates the night before Sinterklaas.
Cricket England and Pakistan face off on the last day of their first Test match in Rawalpindi.
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