The UK will be in recession until the summer of 2023, economists at EY Item Club have forecast.
Having previously predicted 1% growth for the UK the economic forecasting group has now significantly downgraded its expectations.
It now anticipates that the UK economy will contract by 0.2% per quarter from October through June.
But EY expects the economy to return to growth in the second half of 2023 as high inflation eases, the weaker pound boosts exports and the Bank of England’s interest rate rises come to an end.
Once that happens EY forecasts growth of 2.4% in 2024 and 2.3% in 2025.
Hywel Ball, EY’s UK chair, said: “There’s no doubt the UK economy faces a difficult period ahead, with global headwinds adding to domestic pressures.
“The silver lining is that the Government’s intervention on energy bills is expected to limit the extent of the downturn, while ONS data suggests that households have access to a larger cushion of pandemic savings than previously thought.
“Nevertheless, there are very significant risks to the forecast, with the potential for further surprises or global instability creating additional drags on growth.
“Businesses will need to think very carefully about their resilience and plan for different scenarios, while also being mindful of the support they provide to their customers and employees.”
