Britain is poised to sink into recession, CBI reveals as it warns Government a stagnant economy will be ‘set in stone’ if it fails to take action ahead of summer recess

  • The CBI urged ministers to stop their overhaul of the Northern Ireland trade deal
  • New legislation includes plans to scrap most EU checks on goods sent to NI
  • Sir Iain Duncan Smith said the CBI’s response to the problem was ‘hopeless’

A leading business group has downgraded its outlook for economic growth amid calls for Government action to avoid a recession.

The CBI said that with less than 40 days until Parliament goes into its summer recess, the countdown was on for the Prime Minister and Chancellor to take the ‘vital actions’ needed to avoid a recession.

The group warned there was a risk that the economy would be a ‘distant second’ to politics in the coming months because of the cost-of-living crisis, airports struggling to cope, planned national rail strikes and ‘Groundhog Day’ battles with the EU over the Northern Ireland Protocol.

The CBI downgraded its growth outlook to 3.7% for this year, from 5.1% previously, and just 1% in 2023, from 3%.

The CBI said it believes inflation is expected to remain high into the Autumn, rising to 8.7% in October, leading to a ‘historic squeeze’ in household incomes, which will hit consumer spending.

Rain Newton-Smith, CBI chief economist, said: ‘This is a tough set of statistics to stomach. War in Ukraine, a global pandemic, continued strains on supply chains – all preceded by Brexit – has proven to be a toxic recipe for UK growth’

Tony Danker, CBI director general, said: ‘Let me be clear – we’re expecting the economy to be pretty much stagnant. It won’t take much to tip us into a recession, and even if we don’t, it will feel like one for too many people.

CBI under fire over Northern Ireland comments

Tony Danker (pictured), CBI’s Director-General, angered ministers by telling them to ‘stop acting unilaterally’ to fix trade problems in Northern Ireland

The CBI came under fire last night after it urged ministers to abandon plans for a new law to prevent the EU undermining the Northern Ireland peace process.

In a provocative intervention, CBI chief Tony Danker said it was time for the Government to ‘stop acting unilaterally’ to fix post-Brexit problems in Northern Ireland.

His call came as ministers prepared to publish new Brexit legislation today designed to prevent the EU driving a wedge between Northern Ireland and the rest of the UK.

Separately, the CBI warned that Britain was heading for a ‘household recession’ as families slash spending amid the cost of living crisis.

The new Northern Ireland legislation includes plans to scrap most EU checks on goods sent to the province and the downgrading of the European Court of Justice to an advisory role.

Ministers hope the plans will halt the disruption to supplies caused by the checks, reduce political tensions in Northern Ireland and persuade the DUP to re-enter power-sharing.

But Mr Danker said the plan could lead to ‘all kinds of trade disputes’.

‘Times are tough for businesses dealing with rising costs, and for people on lower incomes concerned about paying bills and putting food on the table.

‘It’s as clear as day that business investment is one of the few bright spots left in our economy.

‘We’ve had weeks of politicking with the country standing on the brink of a summer of gridlock.

‘There is only a small window until recess. Inaction this summer would set in stone a stagnant economy in 2023, with recession a very live concern.

‘We need to act now to install confidence.’

The CBI called for measures including steps to alleviate labour and skills shortages.

Rain Newton-Smith, CBI chief economist, added: ‘This is a tough set of statistics to stomach. War in Ukraine, a global pandemic, continued strains on supply chains – all preceded by Brexit – has proven to be a toxic recipe for UK growth.

‘The bottom line is that the outlook for UK exports remains far worse than our worldwide competitors. This has got to change for the better.

‘Business and government must work together to seek growth globally. As demand shrinks, competition for revenue increases. UK business must be more confident in identifying new markets and utilising all the tools at their disposal – be it from the private sector or public sector.

‘Government also has an integral role to play. Against the backdrop of the rising cost of doing business and continuing supply chain pressures, easing trade flows is in everyone’s interests. It’s not just about lowering non-tariff trade barriers in Europe and signing FTAs.

‘Post-Brexit regulatory reforms to support growth, innovation and sustainability can build competitiveness. But divergence for the sake of it could introduce further red tape and friction undermining that mission.

‘Moreover, we can and must do more domestically to help our exporters too. Now that R&D allocations are known, let’s get that funding out the door quickly to the Advanced Research and Invention Agency and others.’

In an interview with The Sunday Times, Mr Danker launched a wide-ranging attack on the Government, saying ministers were too focused on political issues instead of the economy. ‘You have Conservative politicians pushing for their own ideological favourites in return for supporting the PM,’ he said.

‘Some want tougher action, some want Thatcherite ideas such as right-to-buy, some want harsher rules on immigration, some want to slash personal taxes. And that’s working against the right economic picture.

Sir Iain Duncan Smith criticised the CBI’s response to the new Brexit legislation as ‘hopeless’

‘On Brexit we need to stop acting unilaterally… the minute we behave unilaterally we lose the moral high ground and start to escalate towards all kinds of trade disputes.’

Mr Danker’s comments sparked an angry response from Tory MPs, who questioned if the organisation has accepted the Brexit referendum result.

One Cabinet minister told the Daily Mail: ‘It is eccentric for the CBI to call for measures to support growth and then oppose lifting obstacles to trade between Great Britain and Northern Ireland.

‘But then the CBI has long been in thrall to the EU.’

The CBI is urging Rishi Sunak to cut taxes on company spending to help the economy – or risk an ‘incredibly bad’ slump

Former Tory leader Sir Iain Duncan Smith said: ‘Fighting losing battles is the motto of the CBI. Industry in Northern Ireland is suffering and this is their hopeless response.’ Former Cabinet minister David Jones said: ‘The CBI should be working to help those companies that are having huge difficulties in shipping goods to Northern Ireland because of the way the EU is behaving.

‘It took a long time for them to repair their relations with the Government after Brexit and I am surprised they are sticking their oar in again.’

Today sees the publication of the new legislation designed to ease the problems caused by the EU’s implementation of the Northern Ireland protocol. 

Northern Ireland Secretary Brandon Lewis yesterday insisted the new measures would be ‘lawful’ despite warnings from critics that they risk breaking international law by overriding parts of Boris Johnson’s Brexit deal. The Government is expected to publish a summary of the legal advice produced by Attorney General Suella Braverman.

It is believed Mrs Braverman will argue that the EU’s ‘disproportionate and unreasonable’ imposition of checks is undermining the functioning of the Good Friday Agreement. Brexiteer Sir Bernard Jenkin backed ministers’ decision to take unilateral action, saying the EU is ‘trying to stuff the UK and force us back into alignment’.

In a separate warning, the CBI said the UK is headed for a ‘household recession’, in which people’s spending will fall from the second quarter of this year into 2023. It said this could also leave the entire economy teetering on the brink of a recession.

The CBI is urging Rishi Sunak to cut taxes on company spending to help the economy – or risk an ‘incredibly bad’ slump.

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