Although the likelihood of a recession has fallen, UK growth is expected to be negative in 2023, new analysis from KPMG shows.
They warn that the outlook for businesses remains “mixed”, and that Jeremy Hunt’s new measures to boost business investment are likely to have only a temporary effect on UK growth.
In better news, inflation is expected to fall sharply this year as supply chain pressures ease.
Yael Selfin, chief economist at KPMG UK, warns that concerns over the banking sector could also hit the economy:
“Despite slightly stronger near-term momentum and the boost from the recent Budget announcements, ongoing tensions in the banking system and the lingering risk of a recession put a question mark around the outlook for the UK. The good news is that base interest rates have probably already reached their peak.
“Looking ahead, as the economy cools and inflation returns back to target, this may provide the Bank of England with an opportunity for a series of gradual rate cuts next year. Nonetheless, structural issues, including skills shortages, slowing workforce participation, and ageing population, dominate the longer‑term risks to the UK outlook.”