# UK to avoid recession this year but outlook still weak, BCC says
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-09
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: UK Economy Expected to Shrink Less Than Forecast in 2023
Meta Description: The BCC predicts a 0.3% GDP fall this year, improved data points towards economic growth. Challenges ahead include staff shortages and rising costs.
URL: https://financedigest.com/uk-to-avoid-recession-this-year-but-outlook-still-weak-bcc-sayshtml

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By Suban Abdulla

LONDON (Reuters) – The British Chambers of Commerce (BCC) forecast on Wednesday that the country’s economy is on track to shrink less than expected this year and avoid the two quarters of negative growth which mark a technical recession.

The brighter outlook chimed with other measures of Britain’s economy including purchasing managers’ index (PMI) surveys and consumer confidence data that have improved in recent weeks.

The BCC forecast that gross domestic product (GDP) would [fall by 0.3% this year](https://www.financedigest.com/spains-november-retail-sales-fall-0-6-on-year.html "Spain’s November retail sales fall 0.6% on year"), a smaller decline than its previous forecast of a 1.3% fall, after stronger activity at the end of 2022.

Official [data showed the economy narrowly avoided](https://www.financedigest.com/the-race-to-avoid-data-dinosaur-extinction.html "THE RACE TO AVOID DATA DINOSAUR EXTINCTION") a recession after zero growth in the final quarter of 2022. Figures for January are due to be published on Friday.

On a [quarterly basis GDP is forecast to fall](https://www.financedigest.com/logitech-quarterly-sales-fall-22-as-slowdown-fears-bite.html "Logitech quarterly sales fall 22% as slowdown fears bite") 0.3% in the first quarter of 2023, before showing zero growth in the second quarter and rising by 0.2% in each of the third and fourth quarters of 2023.

Economists polled by Reuters last month forecast the economy would [contract 0.4% in the first and second quarters](https://www.financedigest.com/german-gdp-contracted-by-0-4-in-the-fourth-quarter.html "German GDP contracted by 0.4% in the fourth quarter") and then decline 0.1% in Q3.

The BCC expects the economy to grow 0.6% [next year](https://www.financedigest.com/1-in-10-workers-considering-a-career-change-in-the-next-year.html "1 in 10 workers considering a career change in the next year"), while the Bank of England (BoE) predicted a quarter percent contraction for 2024 last month.

Despite the upward revision, [businesses face a tough year](https://www.financedigest.com/why-the-new-year-is-the-best-time-to-start-your-dream-tech-business.html "Why the New Year is the best time to start your dream tech business") ahead amid struggles with staff shortages, rising taxes and energy bills, Alex Veitch, director of policy  at the BCC, said.

Veitch said the economy risked falling behind competitors if chancellor Jeremy Hunt did not provide incentives to help firms in his annual budget [next week](https://www.financedigest.com/china-arrivals-in-uk-next-week-will-not-face-compulsory-covid-tests-independent.html "China arrivals in UK next week will not face compulsory COVID tests -Independent").

If he backs them, by acting on childcare to ease staff shortages and helping them [manage their energy costs](https://www.financedigest.com/managing-the-cost-of-digital-transformation-with-saas-optimisation.html "Managing the Cost of Digital Transformation with SaaS Optimisation"), then the UK economy could still prosper,”  he said.

Britain is the only Group of Seven economy that has yet to rebound to its [pre-pandemic size and the BCC forecast it would not return](https://www.financedigest.com/heathrow-airport-says-return-to-pre-pandemic-demand-years-away.html "Heathrow Airport says return to pre-pandemic demand years away") to that level until the final quarter of 2024.

While [consumers and businesses still face a hit](https://www.financedigest.com/uk-consumer-mood-hits-one-year-high-but-financial-gloom-persists.html "UK consumer mood hits one-year high, but financial gloom persists") from double-digit inflation, the BCC expects inflation to drop to 5% in the fourth quarter and 1.5% by late 2024.

British inflation fell to 10.1% in January, [edging further away from the 11.1% peak](https://www.financedigest.com/dollar-edges-down-from-six-week-peak-swedish-crown-jumps.html "Dollar edges down from six-week peak, Swedish crown jumps") it reached in October 2022, but is still more than five times the BoE’s 2% target.

The BCC [expects BoE rates to be a quarter-point higher at the end of the year](https://www.financedigest.com/philips-expects-to-reach-recall-settlements-this-year.html "Philips expects to reach recall settlements this year") than they are now – taking rates to 4.25% – and then for rates to be cut to 3.5% by late 2024.

(Reporting by Suban Abdulla; editing by David Milliken)


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