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Recession, Inflation and Unemployment: The Economic Outlook for 2023
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What does this economic outlook mean in practical terms for individuals and businesses?
Recession on the horizon
A combination of financial factors has resulted in a high likelihood of recession for the British economy, with the Bank of England predicting it to be ‘prolonged’, through at least the whole of 2023 and then the first half of 2024. Indeed, as households struggle to keep up with the basic costs of living, consumer spending power will be vastly reduced, impacting a variety of sectors and industries.
While other economies worldwide are seeing stabilisation and recovery in the wake of the Covid-19 pandemic, Britain is struggling. The soaring living costs, continually rising energy prices and higher borrowing costs are all amalgamating to create a climate of discontent; with business investments and markets slumping as a result.
Added headwinds from Brexit-related red tape and additional costs for exporters mean the forecast seems fairly certain for recession ahead. Britain is currently the only G7 economy with GDP lower than its pre-pandemic level and so this does lend some help: recovery can be made, if the right direction is taken!
Businesses can thrive through recessions if managed correctly. DL Accounts has worked through such crises before and we can help you through these tumultuous times.
While the UK started 2022 with an inflation level of just over 5%, it ended it on an eye-watering 11%; with blame being landed on the Russian invasion of Ukraine and increasing energy fees. This is the highest level since 1981 – but hope lies on the horizon.
Many economists expect this rate to fall through 2023, as the impact of the Ukraine war drops out of the official figures. However, this doesn’t necessarily mean that prices will reduce in line with this. Energy bills are, unfortunately, likely to remain more than double of that experienced historically, even with the government’s energy price guarantee in place.
One of the fastest changing economic outlook forecasts is that of unemployment. The slump in the economy is expected to drive up the levels of those out of work, as weaker spending appetites and higher business costs will lead employers to make tough staffing decisions.
While as many industries are currently gripped by strikes, this seems at odds with current affairs. Rapid growth in early retirement and long-term sickness levels over the last few years have actually lowered unemployment figures up until now. This predicted decline means that Britain is set to be the continent’s only advanced economy with employment remaining lower than pre-pandemic levels.
Businesses don’t necessarily need to cut back but managing your finances yourself may prove challenging throughout 2023 given the economic outlook. For accounting support, consult with specialists such as DL Accounts – we can offer the ideal solution!