Confederation of British Industry director-general Tony Danker has declared “action or inaction” by the UK Government on supporting growth and investment will be key to determining "whether recession is shallow or deep”.
The CBI has hammered home its view there is a need for a more flexible immigration system, amid labour and skills shortages.
Mr Danker’s comments coincide with publication today of the CBI’s latest economic forecasts. The business organisation now expects UK gross domestic product will fall 0.4% in 2023, having predicted in June that economic output would grow by 1% next year.
Mr Danker said: “Britain is in stagflation – with rocketing inflation, negative growth, falling productivity and business investment. Firms see potential growth opportunities but a lack of 'reasons to believe' in the face of headwinds [is] causing them to pause investing in 2023. Government can change this. Their action or inaction to support growth and investment will be a key determinant of whether recession is shallow or deep."
He added: "We will see a lost decade of growth if action isn’t taken. GDP is a simple multiplier of two factors: people and their productivity. But we don’t have people we need, nor the productivity.
"There is no time to waste. The Prime Minister and Chancellor must use levers of growth to ensure this downturn is as short and shallow as possible, but also to address the persistent weakness in investment and productivity. We cannot afford to have another decade where both are stagnant”.
Flagging “skill and worker shortages”, the CBI said: “With three-quarters of firms facing shortages, we need a joined-up plan. This should include co-ordinated action to enable upskilling and automation across businesses to ease pressures, as well as reducing economic inactivity, supported by a more flexible immigration system.”
It added: “The economy is likely to have fallen into a recession in Q3 2022, when GDP shrank by 0.2%. We expect the recession to last until the end of 2023.”
Against a backdrop of high inflation, the CBI forecasts “the squeeze on households seen this year persists into 2023, leading to a year-long decline in consumer spending”.
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