Policy Spotlight with Rhouda: UK Economic Outlook

Last week, the British Chambers of Commerce (BCC) published its expectations for UK GDP growth for 2022. As the UK inflation rate is expected to reach 10% in quarter 4 later this year, heightened economic uncertainty and rising costs are expected to significantly weaken business investment, resulting in the BCC downgrading its expectations for UK GDP growth to 3.5% from 3.6%.

The expectation for growth in 2022 is now less than half the 7.5% growth which was recorded in 2021, reflecting a combination of soaring inflation, tax rises, less business investment and global economic shocks, all of which have had a detrimental impact on consumer spending.

Sara Williams, CEO of Staffordshire Chambers of Commerce, said: “With petrol and gas prices continuing to reach record highs and inflation expected to reach 10% later this year, the cost of living is really impacting consumer spending and is consequently having a negative impact on business growth, investment and stability.

“Businesses have faced insurmountable pressures since the start of the pandemic, with smaller firms in particular finding it more difficult to grow and invest. With the current tight labour market, businesses will struggle to keep productivity levels high, especially as the demand for workers remains high with low unemployment. Staffordshire Chambers of Commerce, alongside Chambers across the network, continue to urge government to review policies that incentivise business investment.”

The existing political and economic uncertainty means that business investment is now forecast to grow at 1.8% in 2022, which is a large downward revision from the previous forecast of 3.5%. Businesses and consumers continue to face unprecedented inflationary pressures caused by rising raw material costs, the increase in energy price cap and upward pressure on energy and commodity prices. As the consumer price index (CPI) is expected to reach 10% in quarter 4 this year, reaching the highest level since CPI records began in 1989, the financial squeeze will continue to impact businesses and consumers and ultimately cause slow growth in the UK’s economy.

In order to regain business confidence and strengthen the UK economy, the government must put stable and supportive policies in place to help businesses pull the UK out of the economic crisis. Once businesses are able to invest again, economic growth will begin.

Staffordshire Chambers of Commerce holds a Money Matters Forum three times a year, bringing together firms in the financial and professional business sector to exchange information on issues around taxation and corporate law. The forum allows members to discuss issues within their sector and address the current economic outlook whilst also helping to shape the Chambers’ policy and lobbying strategy.

The next Money Matters Forum will be held on 17th June. If you are a member business in the financial sector and are interested to attend, please email rhouda.elalfy@staffordshirechambers.co.uk.

Our forums are also a great opportunity for businesses to network and meet with other similarly minded business owners and leaders.

You can find out more about our forums here: https://staffordshirechambers.co.uk/chambers-forums/.

If you want to talk to us about any business issues, including funding, you can call our switchboard on 01782 202222 or email: info@staffordshirechambers.co.uk.

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