Warning that UK could enter recession until summer 2023

The UK could enter a recession until next summer, financial experts have warned.

Analysts at an economic forecasting group, the EY Item Club, are predicting a prolonged economic decline.

They are forecasting it to result in a 0.3% fall in gross domestic product (GDP) for 2023 as a whole.

An economy enters a technical recession when its GDP falls for two or more consecutive quarters.

A combination of high energy prices, surging inflation, rising interest rates and global economic weakness have driven up the likelihood that the UK economy will face a recession until the middle of next year.

According to the EY Item Club, the risk of a severe downturn was reduced by the UK Government’s energy price guarantee, limiting the average bill for most households to about £2,500 a year.

Hywel Ball, EY’s UK chair, explained that there are “very significant risks” to the economic forecast.

“There’s no doubt the UK economy faces a difficult period ahead with global headwinds adding to domestic pressures,” he said.

“The silver lining is that the Government’s intervention on energy bills is expected to limit the extent of the downturn, while ONS data suggests that households have access to a larger cushion of pandemic savings than previously thought.

“Nevertheless, there are very significant risks to the forecast, with the potential for further surprises or global instability creating additional drags on growth.

“Businesses will need to think very carefully about their resilience and plan for different scenarios, while also being mindful of the support they provide to their customers and employees.”