UK recession threat is now almost 50-50 for economists

Bloomberg

The risk of a UK recession in the next 12 months is now almost 50-50, according to a Bloomberg survey that underscores the darkening outlook for the economy.

While official estimates currently show the nation is likely to dodge two consecutive quarters of contraction, economists are turning increasingly pessimistic because of a surge in inflation. The 13 analysts who answered Bloomberg’s survey in July anticipate a 45% chance of such a downturn in the next year. That’s three times higher than the probability recorded when the survey was done at the start of 2022.

The figures show the scale of the economic challenge awaiting the successor to Prime Minister Boris Johnson, whose decision last week to step aside triggered a contest to lead the ruling Conservative Party and take the top job in government.

Inflation at a four-decade high and a cost of living crisis are the sources of weakness. Johnson’s potential replacements so far are talking about tax cuts and reducing government spending to appeal to the Tory base.

But the economic gloom could soon overtake that debate. Bloomberg’s poll also saw median growth forecasts, which have been cut every month this year, lowered to 3.4% in 2022 and 0.7% in 2023.

That’s well below the pace of inflation, which economists expect to average almost 10% in the final quarter of this year. That’s above the levels predicted for Germany, France, Italy and Spain.