UK Economy to Shrink in 2023, Risks 'Lost Decade' Without Action, Says CBI
The UK’s economy is expected to shrink by 0.4% in 2023, the Confederation of Business Industry (CBI) forecast on Monday.
Facts
- The UK’s economy is expected to shrink by 0.4% in 2023, the Confederation of Business Industry (CBI) forecast on Monday.
- A combination of inflation and economic stagnation — known as stagflation — is the primary reason the business lobby group expects the UK economy to continue to contract. It believes the conditions could lead to a, “lost decade of growth”.
- The CBI has called for more flexible immigration policies to address worker shortages and permanent tax breaks to encourage investment, and to tackle the predicted contraction.
- CBI chief Tony Danker accused UK Prime Minister Rishi Sunak of “going backwards” on the green growth agenda by failing to lift a ban on onshore windfarms. Danker also accused the Conservative party leader of lacking an overall growth plan to address economic inactivity, childcare, worker shortages, and low productivity.
- In October, Danker — who heads the UK’s largest business lobby group with 190K members — warned the government against a “doom loop” of public spending cuts and tax rises.
- The Office of Budget Responsibility has been even less sanguine than the CBI regarding the UK’s economic prospects. In November, it forecast that the UK economy will shrink by 1.4% in 2023.
Sources: Reuters, BBC News, CNN, Independent, Guardian, and Straits Times.
Narratives
- Right narrative, as provided by Yahoo Finance. While last month’s announcement of £55B in spending cuts was necessary to stabilize the economy, it won’t encourage growth. The government must stimulate investment with substantial tax breaks for businesses that spend domestically, bring the UK closer to the EU by finalizing a proper deal over Northern Ireland, and address the shrinking workforce. Only achieving this clear criteria will boost growth and avoid a severe economic downturn.
- Left narrative, as provided by Left Foot. The government’s latest round of tax raises and spending cuts are a massive assault on low- and middle-income families. The UK economy has already been severely damaged by 12 years of austerity, the destruction of public services, unrestrained corporate profiteering resulting in a 14.2% rate of inflation, and labor shortages caused by Brexit and related xenophobia. We need a new direction away from the continued assault on consumer, worker, and environmental protections.
