The latest data on gross domestic product indicates that UK economy has slowed faster than economists had expected, while business confidence has fallen sharply in recent months. Analysts are already cutting forecasts for earnings next year for the UK, Europe and the US, with some predicting widespread profit downgrades and warnings in the autumn.
British companies are preparing for a recession this year as they face the double hit of slowing consumer demand and rapidly rising costs from inflation on their own businesses.
Bosses have said they already see signs of a slowdown, in particular among retailers given the impact of rising costs on consumers. Electricals retailer Currys cut its profit forecast this week, while rival AO raised £40 mn in what its chief executive described as a “sensible piece of financial housekeeping given the short-term macroeconomic uncertainty”.
The CBI has also warned that the government has only weeks to change the direction of the UK economy, with recession now “a very live” risk as household spending turned downwards.
Goldman suggested that the hardest hit companies were typically travel and leisure. “This is the thing people cut first,” said Bell, pointing to a combination of higher rates, lower savings and higher costs from the rising energy price cap and other inflationary factors.
