The Summer Forecast says that business investment is unlikely to return to its pre-pandemic levels on a sustained basis until 2025. Investment is still far below the levels seen prior to the pandemic, despite the relaxation of pandemic restrictions and government incentives.” Business investment continues to under-perform expectations and subdued growth prospects, rising costs and increasing debt, particularly among small and medium-sized companies, mean a turnaround looks unlikely in the short-term. “The challenges are spread across the economy, with both consumers and businesses under pressure. Hywel Ball, EY UK Chair, says: “The outlook for the UK economy has become substantially gloomier than it was in the spring, but – while there are significant risks – the forecast suggests there should still be enough supports to help the economy eke out growth over the rest of the year and avoid a recession. The EY ITEM Club’s downwards revisions are prompted by the continued squeeze on households’ real incomes from higher inflation, ongoing supply chain disruption, borrowers facing the consequences of a series of interest rate rises and the rise in asset prices during the pandemic now subsiding.
As inflation falls back, the EY ITEM Club expects the economy to expand 2.4% in 2024, slightly faster than previously predicted (2.2%).
The EY ITEM Club forecasts UK GDP to grow by 3.7% this year, down from the 4.1% predicted in the spring, followed by 1% growth in 2023, a downgrade from 1.9%.
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