A monthly survey released on Sunday revealed that British businesses do not expect any growth in the next three months as rising living costs squeeze consumer demand.
The Confederation of British Industry (CBI) reported that members experienced above-average growth in the three months to the end of July, slightly faster than in the three months to June, but that this is expected to slow in the coming months.
“As firms and consumers continue to be buffeted by rising prices, private-sector activity has slowed to a near standstill,” CBI economist Alpesh Paleja said.
On Thursday, the Bank of England is widely expected to announce its largest interest rate increase since 1995, raising rates to 1.75 percent from 1.25 percent in order to tame inflation, which is already at a 40-year high of 9.4 percent.
However, the Bank of England has warned that Britain’s economy is likely to contract later this year, when a 40% increase in regulated energy tariffs hits consumers in October, and has forecast a slight contraction next year.
The United States shrank in both the first and second quarters of this year, fitting one definition of a recession. The International Monetary Fund predicted last week that Britain would have the slowest growth of any major economy other than Russia next year.
The CBI reported that its monthly output balance, based on surveys of manufacturers, service companies, and retailers, increased to +8 in July from +5 in June. The anticipated balance for the next three months was zero in July, up from -3 in June.
Manufacturers expect current slow growth to continue, while consumer services and retail businesses expect sales to fall and business services expect growth to slow, according to the CBI.
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