(Bloomberg) -- The U.K.’s biggest business lobby cut its forecasts for growth this year and next as it warned rising costs and shortages are hampering the nation’s recovery.
The Confederation of British Industry said Monday it now expects an expansion of 6.9% in 2021 and 5.1% in 2022, down from 8.2% and 6.1% previously. It expects U.K. business investment to lag behind other advanced economies, and sees it remaining 3% below its pre-Covid level by the end of 2023. The emergence of the omicron variant poses a further downside risk, it said.
The group said the revisions were mainly down to a weaker performance since its June forecasts, highlighting the headwinds caused by inflation and supply-chain issues. It also sees price gains peaking at 5.2% next year and staying above the Bank of England’s 2% target until spring 2023, eroding real incomes and undercutting spending.
“Significant headwinds and rising costs of living threaten the extent of recovery and prospects for economic success,” said CBI Director-General Tony Danker. “These hurdles for firms will provide a major test for Government.”
While lower than before, the forecasts are in line with the latest predictions from the OECD, which showed the U.K. heading for the fastest growth among Group of Seven economies this year and next.
The CBI said it saw only a minimal impact from the end of the government’s job protection plan, and expects the unemployment rate to fall to 3.8% by the end of 2023.
Read More: U.K. Headed for Best Growth in G-7 This Year and Next, OECD Says
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