BCC: UK to avoid recession this year but outlook still weak

“The country's economy is on track to shrink less than expected this year and avoid the two quarters of negative growth which mark a technical recession,” the British Chambers of Commerce (BCC) forecast on Wednesday per Reuters.

Key findings

Gross Domestic Product (GDP) would fall by 0.3% this year, a smaller decline than its previous forecast of a 1.3% fall, after stronger activity at the end of 2022.

On a quarterly basis GDP is forecast to fall 0.3% in the first quarter of 2023, before showing zero growth in the second quarter and rising by 0.2% in each of the third and fourth quarters of 2023.

The BCC expects the economy to grow 0.6% next year, while the Bank of England (BoE) predicted a quarter percent contraction for 2024 last month.

Britain is the only Group of Seven economy that has yet to rebound to its pre-pandemic size and the BCC forecast it would not return to that level until the final quarter of 2024.

While consumers and businesses still face a hit from double-digit inflation, the BCC expects inflation to drop to 5% in the fourth quarter and 1.5% by late 2024.

The BCC expects BoE rates to be a quarter-point higher at the end of the year than they are now - taking rates to 4.25% - and then for rates to be cut to 3.5% by late 2024.

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