The Confederation of British Industry (CBI) said the UK economy was expected to grow slower than previously thought this year and in 2023 due to global supply chain problems. The government should encourage long-term trade investment. The slowdown in the UK economic growth has been exacerbated by the outbreak of Covid-19 and the unplanned withdrawal from the EU.
Predicting the Slowdown in UK Economic Growth
The CBI cut its forecast for UK’s economic growth from 8.2% to 6.9% in 2021 and from 6.1% to 5.1% in 2022. According to the CBI, the slowdown in the UK economic growth reflects a weaker recovery than the last forecast in June and indicates supply chain problems. Problems that have slowed recovery from the recession caused by the outbreak of Covid-19 are likely to end in mid-2022.
The Amount of Commercial Investment in the UK
Given that exports are still weak, household spending will account for 90% of growth next year and two-thirds of the increase in 2023, thanks to a strong labour market and savings accumulated during the pandemic. According to the report, commercial investment in the country is expected to grow by 8.2% over the next year, exceeding pre-pandemic levels. Still, with corporate investment declining in mid-2023, this is likely to be the case when tax incentives run out. The jump will be short-lived. So the slowdown in the UK economic growth will continue.
New Forecasts for Inflation
“One policy in place for 18 months can’t change under-investment over four decades,” Rain Newton-Smith, the CBI’s chief economist, said. The slowdown in the UK economic growth will lead to higher inflation. The CBI’s new forecast shows that inflation will reach 5.2% in April and will remain above the Bank of England’s 2% target for another year, while the unemployment rate will fall to 3.8% by the end of 2023.
Continued Supply Chain Disruptions for One More Year
Most British financial officials believe that supply chain problems in the country will affect the country’s economy for another year. A poll of top British corporate finance executives shows that most believe supply chain problems in the country will continue to affect recovery from the Covid-19 crisis and continue for another year. As the Bank of England struggles to estimate how long the recent rise in inflation will continue, most financial officials believe that inflation will be above 2.5% for another two years. The slowdown in the UK economic growth has convinced monetary authorities that economic problems will continue.
Forecasts for 4% Inflation in the UK
The Bank of England forecast double-year inflation at just over 2% in August, but estimates inflation at 4% in the next few months. The UK economy has been hit hard by shortages of supply as well as labour shortages, which post-Brexit immigration laws have exacerbated. The Bank of England is now expected to raise interest rates for the first time since the start of the Covid-19 pandemic this year or in early 2022. Many British financial authorities intend to increase capital expenditures. The news was widely welcomed by UK PM Boris Johnson, who blamed many employers for supporting the migrant workforce.
The Impact of Covid-19 and Brexit on the UK Economy
The impact of Covid-19, withdrawal from the EU and the shift to clean energy on the UK economy has boosted the country’s investment plans. UK Finance Minister Rishi Sunak introduced a new industrial strategy in the budget on October 27, which includes encouraging digital investment and investment in clean energy. British policymakers have faced several economic problems, including rising inflation, slowing growth, disruption of the supply chain and declining spending.
Consequences of a Slowdown in Economic Growth
The UK economy, which grew following the lifting of coronavirus quarantines, now faces several problems, from disruption of supply chains to rising inflation and the risk of increasing unemployment. These problems have made it difficult for British policymakers to steer the economy. According to Andy Haldane, chief economist at the Bank of England, the country is in a period of volatile inflation and low development.
Slowing Economic Growth
While the UK economy has overgrown since the lifting of Covid-19 quarantines, the latest statistics show that the pace of growth has slowed sharply. Official statistics show that UK economic growth slowed sharply in July, and the same trend continued in the second half of this year.
Supply Chain Problems
British manufacturers faced delays in supplying raw materials even before people rushed to petrol stations to panic-buy, which is also be due to a shortage of lorry drivers. The lack of labour in the UK, which can also be seen in other economies worldwide, has worsened since the country decided to leave the EU and end the free movement of workers from the union.
High Cost to Consumers
Disruptions in the supply chain and rising inflation in the UK have lowered the consumer confidence index in the country. British families have also faced declining government benefits and tax increases. Data from the Bank of England showed that consumers in this country have once again turned to saving rather than spending.
Employment and Wage Rates
Unemployment in the UK has been falling over the past months due to the country’s improved economy and government support programme. But the bailout ended at the end of September, and the Bank of England is now worried about rising unemployment again. Wages have also been increased in the UK, but increasing inflation has affected people’s incomes.
Despite all this, UK PM Boris Johnson has denied the country’s crisis, saying that the UK has a natural ability to solve logistical problems and that the supply chain in this country is solid. The slowdown in the economic growth is a direct result of the performance by Boris Johnson’s government. An unplanned withdrawal from the EU and Covid-19 restrictions put pressure on the country’s economy, with supply chain disruptions leading to further decline.
