Skip navigation

Gloucestershire Business News

Government must act on business investment to avoid recession, says CBI

With less than 40 days until parliament goes into recess, the countdown is on for the Prime Minister and Chancellor to take the vital actions needed to spare the country from dipping into recession, according to the latest CBI economic forecast.

With the cost-of-living crunch showing no sign of abating, airports struggling to cope, national rail strikes on the horizon and Groundhog Day battles with the EU over the Northern Ireland Protocol, there is real risk that the economy stays a 'distant second to politics' this summer.

The CBI's outlook suggests growth will soften as household spending turns downwards amid dented business and consumer confidence.

As a result, the CBI has downgraded its GDP growth outlook significantly, to 3.7 per cent in 2022 (from 5.1 per cent previously) and 1.0 per cent in 2023 (from 3.0 per cent previously).

High inflation is the primary source of weaker growth. CPI inflation reached a 40-year high in April (9 per cent), driven higher by a cocktail of challenges - ranging from supply chain pressures, rising commodity prices and war in Ukraine.

Inflation is expected to remain high into Autumn, rising to another peak in October (8.7 per cent, given a likely rise in Ofgem's energy price cap. The result is a historic squeeze in household incomes, which will lower consumer spending. This in turn will weaken GDP growth towards the end of this year and into the first half of next year.

Tony Danker, CBI director-general, said: "Let me be clear - we're expecting the economy to be pretty much stagnant. It won't take much to tip us into a recession. And even if we don't, it will feel like one for too many people.

"Times are tough for businesses dealing with rising costs, and for people on lower incomes concerned about paying bills and putting food on the table.

"It's as clear as day that business investment is one of the few bright spots left in our economy. The Super Deduction is one of the only reasons we have staved off the threat of recession for now - there must be a permanent successor.

"We've had weeks of politicking with the country standing on the brink of a summer of gridlock.

"There is only a small window until recess. Inaction this summer would set in stone a stagnant economy in 2023, with recession a very live concern.

"We need to act now to install confidence. This can wait no longer."

Meanwhile, the CBI expects a small rise in the unemployment rate - ending 2023 at 4.1 per cent - as weaker economic growth weighs on hiring. Nonetheless, this still marks a relatively tight labour market, with many firms presently carrying vacancies.

Exports continue to underperform compared with our international peers, remaining 10% below their pre-COVID level at the end of 2023.

Rain Newton-Smith, CBI chief economist, said: "This is a tough set of statistics to stomach. War in Ukraine, a global pandemic, continued strains on supply chains - all preceded by Brexit - has proven to be a toxic recipe for UK growth.

"The bottom line is that the outlook for UK exports remains far worse than our worldwide competitors. This has got to change for the better.

"Business and government must work together to seek growth globally. As demand shrinks, competition for revenue increases. UK business must be more confident in identifying new markets and utilising all the tools at their disposal - be it from the private sector or public sector.

"Government also has an integral role to play. Against the backdrop of the rising cost of doing business and continuing supply chain pressures, easing trade flows is in everyone's interests. It's not just about lowering non-tariff trade barriers in Europe and signing FTAs.

"Post-Brexit regulatory reforms to support growth, innovation and sustainability can build competitiveness. But divergence for the sake of it could introduce further red tape and friction undermining that mission.

"Moreover, we can and must do more domestically to help our exporters too. Now that R&D allocations are known, let's get that funding out the door quickly to the Advanced Research and Invention Agency and others."

Related Articles

Versarien's revenues halve and losses rise Image

Versarien's revenues halve and losses rise

Forest of Dean-based advanced engineering group Versarien saw its revenues halve last year.

Gloucestershire company launches same-day service Image

Gloucestershire company launches same-day service

Gloucester-based Freemans Event Partners has launched a brand-new around-the-clock foodservice logistics offer.

Gloucester business expands at Elmbridge Court Image

Gloucester business expands at Elmbridge Court

Just three offices are now available for rent at Elmbridge Court, following the latest letting.

Cirencester town centre to deliver improved parking Image

Cirencester town centre to deliver improved parking

Better parking and traffic control improvements for Cirencester residents and businesses.

Copyright 2024 Moose Partnership Ltd. All rights reserved. Reproduction of any content is strictly forbidden without prior permission.