The UK's economy is at risk of a mild recession next year as inflation takes its toll, according to KPMG.
GDP growth is projected to be more than halved this year, from 7.4 per cent in 2021, and fall to 0.7 per cent in 2023, according to KPMG's UK Economic Outlook report.
The cost of living crisis and rising tax burden have resulted in a fall in consumer confidence, which is set to drag on spending, according to economists at the accounting firm. Business investment is expected to be weak next year without government support. KPMG warned that the risks to its forecast were skewed to the downside and that a stronger fall in consumer spending could cause a recession for the UK next year, which could lead to a 1.5 per cent fall in GDP between the third quarter of this year and the third quarter of 2023.
The UK economy just returned to pre-pandemic size after a 9.3 per cent drop in GDP in 2020 because of Covid- 19. The soaring commodity prices, combined with Russia's invasion of Ukraine, and lock-downs in China that are disrupting supply chains, pose fresh threats. Household incomes will fall by 0.8 per cent because of inflation, which KPMG expects to average 8.1 per cent this year.