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GDP: UK economy sliding closer to recession and worst yet to come, ICAEW warns

Author: ICAEW

Published: 12 Aug 2022

Responding to the latest GDP figures, released by the Office for National Statistics today (Friday 12 August 2022), Suren Thiru, Economics Director for ICAEW, said:

“The UK economy is sliding closer to recession and the worst is yet to come.

“Although the Jubilee celebrations distorted activity in June, falling output in the key services sector and flatlining manufacturing production in the second quarter indicates a deepening malaise as crippling inflation increasingly stifles economic activity.

“Business investment remains worryingly short of pre-Covid levels, despite a strong uptick in the quarter. Soaring cost pressures are leaving firms with little headroom to invest, restricting the UK’s ability to lift productivity.

“The economy should rebound in July, but the speed at which spiralling energy bills and inflation are devastating people’s incomes means that a winter recession looks unavoidable. With these headwinds increasingly limiting firms' ability to operate and invest, the downturn maybe more painful than the Bank of England predicts.

“Against this backdrop, the case for the Monetary Policy Committee shifting gear on interest rates to a more moderate pace of monetary tightening is only likely to grow.”