‘Impending recession to be twice as bad as previously thought’

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Next three years in the UK could be worse than what was anticipated three months ago, stated a recent report, suggesting that the country’s impending recession could be twice as bad as previously thought.

Reduced government support, higher taxes and an overall worsening outlook have all led the business consultancy EY’s analysts to conclude that the next three years could be worse than they anticipated three months ago, The Guardian stated.

In an updated forecast released today (23), it said GDP would drop 0.7 per cent this year, followed by growth of 1.9 per cent and 2.2 per cent over the next two years.

In October, EY’s Item Club had predicted a 0.3 per cent contraction in gross domestic product (GDP) this year, followed by 2.4 per cent growth next year and a 2.3 per cent rise in 2025.

“The UK’s economic outlook has become gloomier than forecast in the autumn, and the UK may already be in what has been one of the mostly widely anticipated recessions in living memory,” said EY’s UK chair, Hywel Ball.

“The one silver lining is that, despite being a deeper recession than previously forecast, it won’t necessarily be a longer one,” Ball said. “The economy is still expected to return to growth during the second half of 2023 and has been spared any significant new external shocks in the last three months from energy prices, Covid-19 or geopolitics. Meanwhile, the chief headwind to activity over the last year – high and rising inflation – may be starting to retreat, while energy prices are falling too.”

EY said it was still unclear if the country was already in recession – as defined by two quarters of consecutive GDP contraction. While the economy shrank in the third quarter of last year, GDP figures released this month showed that the economy grew unexpectedly in November by 0.1 per cent.