Economic growth set to slow

The UK economy will grow at a slower pace than expected next year, with trade set to lag “significantly”, a business group is predicting.

The British Chambers of Commerce (BCC) said economic growth was projected to slow to 4.2% in 2022, compared to its previous forecast of 5.2%.

The downgrade largely reflects a softer outlook for consumer spending amid an anticipated “running down” of household savings built up during lockdowns, said the BCC.

The rising cost of imported raw materials and higher energy prices are expected to lift CPI inflation to 5.2% in the second quarter of 2022.

If the current global supply chain disruption eases in the second half of 2022, inflation is expected to drift back towards the

Bank of England’s 2% target by the middle of 2023, said the report.

Suren Thiru, head of economics at the BCC, said: “Our latest outlook suggests that the loss of momentum in the third quarter was more than just a temporary blip, with UK growth forecast to be more subdued for a sustained period as supply disruption, staff shortages and surging inflation limits activity.

“The downgrades to our forecast reflect a moderating outlook for key areas of the UK economy.

“Consumer spending is likely to be more restrained over the near term from a combination of negative real wage growth and stretched household finances.

“Trading conditions for UK exporters are expected to remain difficult with the lingering impact of Covid and Brexit expected to weigh on trade flows for some time to come.

“The Omicron variant could stall the recovery if it triggers a prolonged reluctance among consumers to spend or a renewed supply shock by exacerbating current staff shortages through a new ‘pingdemic’ and driving more supply chain disruption.”

Consumer spending is likely to be more restrained

DOWNGRADE: Suren Thiru, head of economics at the British Chambers of Commerce.