The UK economy could be destined for a downturn, causing the cost of living to skyrocket.
A key business organization has issued a grave warning about the country’s financial prospects in the coming year.
The CBI’s prediction came just hours before official numbers proved that the economy dropped in April for the second time.
According to figures from the Office for National Statistics, gross domestic product decreased by 0.3 percent in April, compared to 0.1 percent in March.
The impact of the test and trace program’s winding down on the health sector, as well as the impact of increased energy prices on manufacturing, were the biggest drags on growth, according to the ONS.
The CBI did not predict a recession outright, but warned the economy will be hanging just above the line and might easily go through.
It lowered its growth forecast for this year to 3.7 percent from 5.1 percent previously, and for 2023 to barely 1% from 3 percent.
The CBI expects that inflation will stay high into the autumn, rising to 8.7% in October, resulting in a “historic pressure” on household earnings, which will affect consumer spending.
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.’
The business leader accused legislators of ‘weeks of politicking with the country on the verge of a summer of gridlock,’ and urged the government to take additional steps.
The CBI urged for actions to address labor and skills shortages, among other things.
The figures were described by Rain Newton-Smith, the CBI’s senior economist, as “a difficult set of statistics to digest.”
He said war in Ukraine, a global pandemic and continued strains on supply chains are a ‘toxic recipe’ for growth when coupled with Brexit.
Mr Newton-Smith continued: ‘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.’
Environment secretary George Eustice said there are ‘some real challenges ahead’ but defended the government’s handling of the economy.