Influential report says UK could be headed for recession

Influential report says UK could be headed for recession Source KPMG

An influential report released by auditors KPMG suggests that the UK could be headed for a recession, with the combination of global factors and efforts to curb inflation likely to drag the economy down.

The report released on Monday, June 27 warns that: “The UK economy faces a number of global and domestic risks.

“These could lead to a significant deceleration in economic growth and potentially to a mild recession.

“We expect GDP growth to more than halve this year to 3.2 per cent, before slowing further to 0.7 per cent in 2023. The cost of living crisis and the rising tax burden has led to a fall in consumer confidence which is set to drag on discretionary spending.

“The risks to our outlook are skewed to the downside.

“A sharper deterioration in the external environment – causing a recession in some of the UK’s major trading partners – coupled with a stronger fall in consumer spending in the UK, could see the UK economy entering a mild recession next year, with manufacturing and financial services among the worst affected sectors.”

There is good news in the report which suggests that employment will rise over the next year, but real wages are set to suffer. It says that whilst pay may continue to rise there is uncertainty around this issue, with wages in real terms set to fall.

The report says: “A key question ahead of the summer months will be whether the squeeze on household budgets will result in lower demand for employees as businesses adjust their hiring needs against the backdrop of weaker activity.

“Our forecast envisages a gradual pickup in the unemployment rate, averaging 4.2 per cent in 2022 and 4.6 per cent in 2023.” 

The report goes on to say that these are uncertain times in which pretty much anything can happen and it is difficult to forecast what might happen in the recruitment market. It cites an example saying:” A sharper slowdown in activity could depress hiring more significantly, thus limiting the strong bargaining power currently exerted by employees.

“Set against that, a continued inflationary environment could lead to escalating pay demands.”

The influential report highlights the many uncertainties in the world and the continued supply chain as some of the reasons why the UK could be headed for recession.


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Written by

Peter McLaren-Kennedy

Originally from South Africa, Peter is based on the Costa Blanca and is a web reporter for the Euro Weekly News covering international and Spanish national news. Got a news story you want to share? Then get in touch at [email protected]

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