The Confederation of British Industry (CBI) has issued a bleak economic forecast for the UK, stating that consumer spending and the overall economy will remain weak in 2024. The CBI predicts that consumer spending will see minimal growth, barely surpassing the weak levels seen this year. In addition, inflation is expected to remain higher than the Bank of England’s target, although it is projected to decrease from its current levels.

According to the CBI, the UK will continue to face significant challenges that will limit economic growth in the upcoming year. After a GDP growth rate of 0.6% in 2023, the CBI expects growth to reach 0.8% in 2024 and eventually rise to 1.6% in 2025.

The forecast indicates that consumer spending will remain weak in 2024, with a predicted increase of only 0.4%, which is nearly unchanged from this year. The main cause of this stagnation is said to be higher interest rates, which continue to negatively impact household incomes. Although the CBI anticipates the Bank of England’s interest rate hikes to come to an end, the delayed effects on the economy mean that households have not yet fully experienced the consequences of increased borrowing costs. The Bank rate is expected to remain at 5.25% throughout the year.

Interestingly, despite expectations of a decrease in inflation, it is forecasted to stay above the Bank of England’s target of 2% in the coming year. Inflation is projected to reach 2.5% by the end of 2024 before returning to target levels in mid-2025. The CBI also indicates that sluggish growth will have an impact on business investment, which is expected to decline by 5% in 2024.

Louise Hellem, CBI Chief Economist, recognizes the challenges that the economy has faced over the past couple of years but commends the resilience displayed by businesses and households. However, she emphasizes that the forecasted weak growth for 2024 indicates that the challenges are far from over. Businesses are preparing for another difficult year, and considering the already challenging economic climate, it is clear that the 2020s have yet to bring substantial economic growth.

Useful Links:
1. Bank of England
2. Confederation of British Industry (CBI)