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UK Growth challenges

Its economists are predicting 6.9 per cent growth in GDP this year and 5.1 per cent next, down from its June forecasts of 8.2 per cent and 6.1 per cent, respectively. 

Tony Danker, director-general of the CBI, said that "pro-investment and pro-innovation regulation to help build new markets, a competitive tax regime that incentivises business investment across the board and new market-making interventions, for example on clean energy" could jump-start productivity. 

The Organisation for Economic Co-operation and Development has lowered its prediction for UK growth next year to 4.7 per cent, from 5.2 per cent three months ago. Their growth forecast for 2022 has been cut from 5.4 per cent six months ago to between 1.8 per cent and 4.3 per cent. The CBI said that the "foundations" for economic recovery were firm despite global supply challenges, with continued employment growth supporting household spending over the next couple of years. However, companies fear a brutal end to 2021, with 80 per cent of the 500 mid-sized businesses questioned last month by BDO, the accountancy firm, saying that they expected their performance to be hit by rising fuel prices, disrupted supplies or higher energy costs. 

Yael Selfin, a chief economist at KPMG UK, said that "the potential reintroduction of social distancing measures could see output fall this month and during the first quarter of 2022". 

Rain Newton-Smith, the CBI's chief economist, said: "UK exports are being outpaced by our global peers, which, if allowed to continue, will negatively impact our economy in the long term." In addition, the CBI said that the recovery in exports was likely to be "lacklustre" after disappointing growth this year. 

KPMG'sKPMG's economists said that GDP growth could more than halve next year if restrictions were introduced. 

The CBI said that short-term headwinds, such as supply chain disruptions and inflation, intensified since June'sJune's last forecast. 

Ed Dwan, a partner at BDO, said: "Many businesses will have been hoping for a solid finish to 2021 and a fresh start for 2022. 

    Economists have cut their growth forecasts for next year because of concerns about rising costs, shortages and the possibility of more Covid restrictions. As a result of inflation, almost a third planned to cut the number of products or services they offered and 31 per cent planned to put up prices. Without government intervention, poor productivity persists in the CBI'sCBI's forecast, with output per worker remaining 17 per cent below its pre-2008 trend at the end of 2023. Moreover, it believes that a recovery in business investment appetite will be brief, with capital spending falling from mid-2023 as the super-deduction incentive comes to an end and as the rise in corporation tax kicks in. The harsh reality is that ongoing supply chain issues, rising energy prices and increasing costs mean that many take drastic measures to stay afloat. As a result, it lifted its inflation forecasts to 4.9 per cent in the first half of next year.

Summarised www.sba.tax
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