According to the International Monetary Fund forecast, Britain’s economy will slow in 2022 and face weaker economic growth and more persistent inflation than any other major rich nation in 2023. The IMF said its downgrades for 2022 and 2023 reflected “elevated inflation pressures” and tighter monetary policy.
The consumer price index jumped to 7% in the 12 months to March, a 30-year high, and is set to go higher in April when big hikes in power tariffs kicked in. The government’s budget forecasters said in March that inflation could touch almost 9% later this year, depending on energy prices.
Experts fear that Britain’s economy is heading for a slowdown, or possibly even a recession, as consumers and businesses are hit by the leap in inflation, higher taxes, rising interest rates and uncertainty caused by the war in Ukraine.
While Bank of England Governor Andrew Bailey said the BoE was walking a tight line between tackling inflation and avoiding a recession, so far, finance minister Rishi Sunak has resisted calls to add to his support for households.
Consumer confidence slumped this month to close to its lowest level since records began nearly 50
years ago. The report sent a recession warning signal. Among businesses, optimism dropped for the
third month running in April and was the lowest since October 2020, according to the S&P Global/CIPS composite Purchasing Managers’ Index.
Spending in shops by consumers also fell more than expected in March, adding to a slip in February, according to official data. Volumes are above levels before the pandemic but are
lower than they would have been without it.
As the squeeze on earnings tightens, households have been using savings they built up during the
coronavirus pandemic. The amount of money households save as a percentage of gross disposable
income plus pension accumulations fell back to close to its pre-pandemic level in the last three months of 2021.
