Millions will join bread line in recession-hit UK, NIESR warns

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  • UK GDP expected to grow just 0.5% in 2023 – NIESR
  • Households without savings will double to 5.3 million by 2024
  • Some 1.2 million households lack money for food and heating

LONDON, Aug 3 (Reuters) – Britain’s deepening cost of living crisis will cost millions of households their life savings unless the government immediately increases support for households, a group warned on Wednesday. foreground thinking.

The National Institute for Economic and Social Research (NIESR) has said Britain is slipping into a recession that will hit the most deprived parts of the country and force more than a million households to choose between heating their homes and buying enough of food.

Consumer price inflation hit a 40-year high of 9.4% in June, and the NIESR expects it to be slow to decline, averaging 6.9% l ‘next year.

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As the two final candidates in the race to become the next British Prime Minister, Liz Truss and Rishi Sunak, debate tax cuts and the restriction of public spending, the NIESR says resources should be diverted urgently to help the most vulnerable.

NIESR director Jagjit Chadha said ordinary Britons would pay the price for years for what he saw as underinvestment in public services, which had left them vulnerable to successive economic shocks like Brexit, COVID-19 and the war in Ukraine.

“This requires an urgent, sustained and credible response from successive governments,” Chadha told reporters at a news conference.

“Unfortunately, it is not clear to me that we have the political institutions to achieve this.”

A recession is expected to begin in the current quarter, with a 50/50 chance that the economy will end this year below its end-2021 level, according to the NIESR forecast.

The economy is expected to grow at an average annual rate of 3.5% this year – reflecting a favorable comparison with output in early to mid-2021 when COVID restrictions were still in place – but would grow only 0.5% in 2023, predicted the NIESR.

The International Monetary Fund last week also predicted growth of 0.5% for Britain next year, the lowest forecast among advanced economies in the Group of Seven.

MISERY

The NIESR said the number of households without savings is expected to double to 5.3 million, or one in five, by 2024.

Some 1.2 million households will face destitution in the coming year, whose food and energy bills will exceed what is left of their income after paying for housing and taxes.

“These are devastating numbers,” said Arnab Bhattacharjee, research manager at NIESR.

The NIESR said the government should immediately reinstate a 25-pound ($31) weekly increase in the Universal Credit state benefit that had helped many people weather the COVID-19 pandemic, and increase bill subsidy energy for low-income households at 600 pounds versus 400 pounds. .

Adding to pressure on households, the Bank of England is expected to raise its main interest rate to 3% by the end of next year to contain inflation, the NIESR said – well above the peak of 2.25% expected in the latest Reuters consensus poll of economists.

The BoE is expected to raise its discount rate by 50 basis points on Thursday, according to the poll, which would be the biggest hike since 1995.

($1 = 0.8181 pounds)

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Editing by David Milliken

Our standards: The Thomson Reuters Trust Principles.

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