Business leaders have called on the new prime minister to urgently tackle the economic crisis as new estimates suggest the looming recession will last longer than forecast.
“Action is needed now,” the British Chambers of Commerce (BCC) warned as it further downgraded its predictions for the year ahead amid “a deteriorating economic outlook.”
High streets have been hit by a slowdown in post-Covid recovery as cost of living pressures have discouraged consumers, figures show.
Total UK footfall was down 12.4 per cent in August compared with the same month three years ago, according to the British Retail Consortium (BRC).
Exceptionally high costs are already hitting consumers and businesses amid rampant inflation.
Alex Veitch, director of policy at the BCC, said those pressures “are only likely to increase as we head towards Christmas, with the UK economy already thought to be in recession”.
He added: “Tackling these pressures must be at the top of the new prime minister’s inbox when they take up their position next week.
“We have revised our projected inflation rate upwards by four percentage-points to a new high of 14 per cent. Inflation is running rampant, and it is not only impacting the cost of doing business, but also the ability of some firms to keep their doors open. Action is needed now.”
The BCC downgraded its expectations for UK GDP growth for 2022 to 3.3 per cent (from 3.5 per cent in Q2) and is now forecasting a recession for the UK economy this year, with negative economic growth for three consecutive quarters of Q2, Q3, and Q4 2022.
“Time is fast running out. The government must step up to the plate and do what is needed to protect businesses, livelihoods and jobs,” Mr Veitch added.
Separately, house prices are likely to stall next year as inflation continues to bite and mortgage rates rise, but rental prices will continue to increase despite affordability pressures on tenants, an estate and lettings agent has predicted.
Hamptons said it forecasted that prices would be unchanged in the fourth quarter of 2023 compared with the same period in 2022, with 0 per cent change across Britain.
Sales are expected to be hit next year, with a drop stemming from mortgaged buyers, particularly first-time buyers, according to the forecast.
The estate agent said 2024 could be a “year of recovery” before the Bank of England base rate “returns to its new normal, likely to be around 1.75 per cent”.
It predicts rents will rise by 5 per cent annually in 2023 and in 2024, before the rate of rise slows slightly to 4 per cent in 2025.