UK economy expected to be only major economy to shrink in 2023 – IMF
The UK economy will contract and perform worse than other advanced economies as the cost of living and hight taxation continues to hit businesses and households, the International Monetary Fund (IMF) has said.
The IMF said the UK economy will contract by 0.6% in 2023, rather than grow slightly as previously predicted, adding that while the prospects for every other member of the G7 group of leading developed nations had improved or remained unchanged since October, rising interest rates and higher taxes had made the outlook for the UK gloomier.
Pierre-Olivier Gourinchas, the IMF’s economic counsellor, said 2023 would be “quite challenging” for the UK as it slipped from top to bottom of the G7 league table. “There is a sharp correction,” he added.
The IMF said Britain’s expected GDP fall reflects “tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets”.
Today’s forcast efforts by chancellor Jeremy Hunt to talk up UK growth prospects in his first major speech in the post, declaring that “declinism about Britain was wrong in the past and it is wrong today”.
Mr Hunt said: “The governor of the Bank of England recently said that any UK recession this year is likely to be shallower than previously predicted, however these figures confirm we are not immune to the pressures hitting nearly all advanced economies.
“Short-term challenges should not obscure our long-term prospects – the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years.”
UKHospitality Chief Executive Kate Nicholls said:
“The IMF’s growth’s forecast is a frustrating reflection of the economic challenges that lie ahead for the country.
“Hospitality has proven it can generate rapid economic growth with the right support and investment, which I’d urge the Government to now commit to the sector. We saw this potential realised in November, where the sector was pinpointed as the main reason for unexpected economic growth.
“However, hospitality businesses in the UK find themselves hamstrung by loans they took out during the pandemic, unlike many of our European counterparts that benefitted from grants.
“The indebted nature of the sector needs urgent attention and I’d urge the Chancellor in his Spring Budget to direct banks to allow an extension of the CBILs repayment term by 10 years and instruct HMRC to offer greater flexibility on ‘Time to Pay’ in order to relieve stress on business cashflow.
“Implementing the right measures now can see the sector survive current challenges and also allow it to thrive into the future; delivering much-needed economic growth and job opportunities.”