“Urgent action” needed to incentivise investment  

The prominent business group’s forecast warned soaring inflation and tax rises will bite, as it downgraded its growth outlook for 2023 to 0.6%.

Its report said the forecast dip in business investment was “especially concerning” and called for “urgent action” to be taken.

“We are having constructive conversations with the government about its review of capital allowances and other policies to incentivise business investment,” BCC said.

“The downgrade reflects heightened political and economic uncertainty, and rising cost pressures which are limiting smaller firms’ abilities to invest. The survey data for business investment have shown no sign of recovery since the start of the Covid pandemic.”

The BCC further predicted inflation will likely reach 10% before the end of 2022, as petrol prices have reached new highs of £1.80 per litre and gas prices continue to rise.

“We forecast that if trends continue, inflation will only return to the Bank of England’s target rate of two percent at the end of 2024, implying a prolonged period of difficulty for the UK,” BCC said.

BCC’s predictions come following the Organisation for Economic Co-operation and Development’s (OECD) starker forecast.

The Paris-based thinktank said UK growth rate would fall from the second-fastest-growing economy within the G7 to the slowest, once GDP growth stalls at zero next year.

Additional pressures on consumers are likely to arrive in the form of higher interest rates, imposed by the Bank of England (BoE). It has already hiked them twice in 2022, most recently in May.

The BCC said BoE’s base rate would reach two percent by the end of 2022 and three percent in 2023 – spiking mortgage rates to levels not seen since before the 2008 crash.

The Monetary Policy Committee (MPC) will meet on June 16, when experts believe they will raise the bank’s base rate from one percent to 1.25%.