UK 'will AVOID a recession this year but won't stop feeling like it'

UK ‘will AVOID a recession this year – but it won’t stop it feeling like one’, think-tank predicts

  • One in four UK households would not earn enough to cover energy and food bills
  • But GDP will grow by ‘anaemic’ 0.2 per cent and UK avoid ‘technical’ recession
  • READ: MPs urge ministers to ‘prove IMF wrong’ after they predicted grim future

Britain will avoid a recession this year but it will still feel like one for households struggling with the cost of living, according to a think-tank.

The National Institute of Economic and Social Research (NIESR) predicted that one in four, or 7 million, UK households would not earn enough to cover all their planned energy and food bills over the coming year as inflation continues to bite.

Meanwhile middle-income households face a hit of up to £4,000, or 13 per cent, of their personal incomes, it said.

The think-tank predicts GDP will grow by an ‘anaemic’ 0.2 per cent this year and avoid a ‘technical’ recession, defined as two successive quarters of shrinking GDP.

It says that ‘compared to recent economic turmoil the intervening few months have appeared calm’, helping the UK steer away from recession.

This ‘cautiously optimistic’ view is brighter than that of the Bank of England (pictured) and the International Monetary Fund, which have both forecast that the UK economy will shrink in 2023

This ‘cautiously optimistic’ view is brighter than that of the Bank of England and the International Monetary Fund, which have both forecast that the UK economy will shrink in 2023.

But NIESR points to heavier tax burdens on individuals – with income tax thresholds frozen – and businesses – with corporation tax set to rise – as one reason for the economy’s weakness.

However the extension of government subsidies to help consumers with soaring energy bills will cushion the blow for households, the report said.

It recommends that Chancellor Jeremy Hunt loosens the purse strings – primarily through boosting investment and giving more help to struggling households – in a bid to boost growth.

NIESR director Jagjit Chadha said it was not clear that a cut in taxes would immediately solve problems in economy with productivity, investment and labour shortages.

But he added: ‘Over the very long run, lower taxes, particularly on firms and investment, may help.

‘I think potentially it’s the right medicine but not for the illness we’re currently suffering from.’ 

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