NEWS8 February 2023

UK ‘likely’ to avoid recession in 2023 but think tank paints ‘bleak’ outlook

Cost of Living Energy Finance News Trends UK

UK – The UK is expected to avoid a recession this year but for millions it will feel like a recession amid the cost-of-living crisis, according to research from The National Institute of Economic and Social Research.

person taking bank notes out of a wallet

A quarterly publication on the UK economic outlook from the National Institute of Economic and Social Research (NIESR) has painted a “bleak” outlook for the year ahead as rising prices hit household wallets.

It forecasts that one in four UK households, or seven million, will not earn enough to pay their energy and food bills this year. This compares with one in five not being able to pay them in 2022.

NIESR expects the economy to grow by just 0.2 per cent this year, and one per cent in 2024, which is a more optimistic forecast than the Bank of England and International Monetary Fund, which said the UK economy will shrink this year.

Despite its prediction that the UK will “likely” avoid a recession, NIESR said it would still feel like a recession for millions, particularly in the North East of England and parts of Scotland, Wales and Northern Ireland.

The think tank research also found that middle-income households will face a hit of between seven to 13 per cent on their personal disposable incomes.

It also said that the “labour market remains strong” but due to “anaemic growth” it forecast a slow rise in unemployment in the coming year, peaking at around 4.7 per cent in the third quarter of 2024.

People between the age of 50 and 64 will also return to the labour market, it said, as they find their savings run down, and fewer workers retire early.

NIESR also said the longer-term growth productivity prospects for the UK could be impacted by higher interest rates which mean higher costs on lending for businesses, increasing the risk of lower business investment.