The National Institute of Economic and Social Research (NIESR) has predicted that the UK is likely to avoid a ‘technical recession’ in 2023 but warns that it will certainly feel like a recession for many, due to GDP growth set to remain close to zero and real personal disposable income having contracted for four consecutive quarters.
The think tank projects that seven million UK households (one in four) will be unable to meet in full their planned energy and food bills from their post-tax income in 2023/24, up from around one in five in 2022/23. Middle-income households, will face a hit to their personal disposable income ranging from 7% to 13%, reaching up to £4,000 in the financial year 2022/23.
The think tank said the labour market remains strong but because of anaemic growth, they think there will be a slow rise in unemployment in the coming year, peaking at around 4.7% in the third quarter of 2024.
The authors of the report said that higher interest rates mean higher costs on lending for businesses, increasing the risk of lower business investment. This may affect the longer-term growth and productivity prospects for the UK.
The NIESR added that inflation continues to remain a concern for the 2023 outlook at both the macroeconomic and household level. Despite falls in the headline figure, measures of ‘core’ or underlying inflation suggest that inflationary pressures are still present in the UK economy. The NIESR predicts that inflation will still be above 3% at the end of 2024.Click below to share this article