The UK economy is expected to remain in recession until at least the end of next year, shrinking by 1.3% in 2023.
In a new economic forecast, KPMG said the UK has already entered a “shallow but protracted” recession amid persistent inflation and higher interest rates.
The new report raised its forecast inflation rate to 7% for next year, after previously forecasting 5.6% for the year.
Yael Selfin, chief economist at KPMG UK, said rising food and energy costs have squeezed household spending power this year.
“Households are expected to rein in spending on discretionary items in 2023 in response to the income squeeze,” he said.
‘As consumers rein in their spending, we expect a significant reduction in the non-essential household spending categories most affected by increases in energy and food costs, including food and entertainment spending.
‘The outlook could turn more positive, especially if energy costs return to previous levels. However, given the state of public finances, risks are likely to be on the downside.’
KPMG believes the country entered a recession in the third quarter of 2022, with figures from the Office for National Statistics showing the economy contracted 0.2% between July and September.
A technical recession is defined as at least two consecutive quarters of contraction when the country’s gross domestic product begins to decline noticeably.
KPMG also predicted that the UK job market will deteriorate from the first half of next year.
The unemployment rate, which rose to 3.7% in the three months to October, could reach 5.6% by mid-2023, an increase of around 680,000 people.
Interest rates were raised by the Bank of England to a 14-year high of 3.5% earlier this month and are expected to reach at least 4% by spring.
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https://metro.co.uk/2022/12/19/uk-recession-will-last-until-end-of-next-year-experts-warn-17960970/ The UK recession will last until the end of next year, experts warn