Britain is set to experience the worst economic performance of the rich G7 countries over the next two years, including the deepest recession next year, suffering from runaway inflation exacerbated by labor shortages, according to the OECD.
The Organization for Economic Co-operation and Development (OECD) expects gross domestic product (GDP) to fall by 0.4% next year after growing 4.4% this year, in its latest published forecast.
For 2024, the OECD, which brings together the most industrialized countries in the world, expects growth of 0.2% in the UK.
However, the organization is more optimistic than the OBR, the UK budget forecasting body, which expects -1.4% next year. The Bank of England is even more pessimistic, expecting a contraction of 1.5% next year, followed by a further 1% in 2024.
Although the UK is less dependent than other countries on disruptions in the supply of Russian hydrocarbons, its energy mix is nevertheless heavily dependent on gas, whose prices have risen over a year.
The country also suffers from an acute shortage of workers, mainly due to an increasing number of cases of long-term illnesses, which reduces the active population, but also due to Brexit, which complicates the employment of European workers.
More and more business leaders, such as those from the British clothing giant Next or Manchester airport, are criticizing the impact of leaving the EU on immigration and thus on the labor market.
On Monday, the head of the CBI, the main employers’ organisation, asked the government to relax migration rules to welcome more foreign workers, saying there were not enough arms in the country to meet the needs. .
Inflation is currently above 11% in the UK and is expected to gradually fall to 2.7% by the end of 2024, the OECD expects.
The organization also criticizes that the support for energy bills that London has given to the British is not sufficiently aimed at the most needy.
The massive spending generated will “feed inflation” which “will require a greater tightening of monetary policy” and therefore risks weighing even more on activity, the OECD claims.
The organization thus estimates that the Bank of England, which has raised its key rate regularly for several months to counter price rises, should raise it to 4.5% in the second quarter of 2023.
Within the G7, Germany should record 1.8% growth this year and then a 0.3% decline next year, almost as strong as across the Channel, before a 1.5% recovery in 2024, according to the OECD .
By comparison, the US should experience growth of 1.8% this year, then 0.5% next year and 1.0% in 2024.