The UK’s economy is expected to take until 2024 to recover to its pre-Covid levels, driven by a slowdown in hiring and business investment.
The analysis, from Deutsche Bank, predicts UK GDP will fall by 0.5% in 2023, before growing by one percent in 2024 and by 1.25% in around 2025. GDP is, however, expected to have risen by 4.5% this year - up from the 3.5% forecast before.
It said there had been a drop in business confidence in the past quarter, but explained the government’s tax cuts and energy support scheme would help add about 0.5% to UK GDP over the next year.
However, higher interest rates from the Bank of England would shave close to 0.8% off GDP relative to the bank’s previous estimates.
Deutsche also said it had identified three key factors that had altered its forecasts going into the fourth quarter of 2022.
Firstly, it said the UK’s fiscal policy would provide more of an offset to lingering and persistent inflation.
The second was that higher interest will likely act as a drag on growth, with the final factor being the overall weakening of the global economic backdrop.