Britain is still on course to avoid a recession this year, but growth will be “flat” as stubborn inflation and a tight jobs market continue to weigh on the economy, according to the latest forecasts from the British Chambers of Commerce (BCC).
The lobby group raised its growth forecast for 2023 to 0.3 percent but warned that economic activity “will remain weak throughout the year”.
And the BCC found that inflation remains the main concern for businesses, with the group forecasting the consumer price index (CPI) rate to reach five percent by the final three months of the year.
Inflation fell to single digits for the first time in nearly a year in May, but beat expectations after a jump in core inflation, which excludes volatile food and energy prices.
Despite stubborn levels of inflation, the BCC raised its forecast due to “higher levels of household spending and recent increases in public investment in business” and said the economy will be “flat” for this year.
“Evidence from recent BCC business surveys also shows a rebound in business confidence at the start of 2023,” said analysts at the group. “However, despite greater political stability, higher inflation rates and a lack of a job market continue to weigh on growth.”
The BCC said it expects three quarters of growth of 0.1 percent and one quarter of no growth — leading to the overall figure of 0.3 percent for the year.
This forecast is in line with the Bank of England’s forecast but more optimistic than that of the Office for Budget Responsibility.
Bank policymakers will also raise interest rates to 4.75 percent in the second half of 2023 to tame stubborn inflation, the BCC predicted, above its previous forecast of 4.25 per dollar.
Rates are expected to drop to four percent in 2024, and 3.75 percent in 2025.