Households in the UK are “going to go into recession this year”, according to the head of the Confederation of British Industry (CBI).
He told Sophie Raworth on the BBC’s Sunday Morning show: “I think the truth is households are going to go into recession this year.
“ What do I mean by that? I mean that consumption and spending that we all make in the high street and on discretionary goods that is going to go negative already this year and the only thing stopping us from having a full blown recession this year is at the moment business investment levels are quite high.
“The risk is if business investment starts to fall then the whole country could go into recession sooner than some are predicting, i.e. next year.”
He said there was “not a lot” that could be done to boost household spending when inflation was high and that families were already “trading down” by spending less.
Mr Danker said the recent “political drama” which included a bid by Conservative MPs to force the Prime Minister out of office was not good for “economic confidence building” and said the Government had to behave in the way it had when it confronted the Covid pandemic.
He said: “That’s the kind of behaviour we need from government now.
“Business as usual, let’s have a budget in November and let’s keep having a debate amongst the Conservative Party about what’s the right way to do taxes and how can we go harder on Brexit, that stuff doesn’t help.
“We need to put the events of last week behind us.”
His warning comes as the Bank of England is expected to hike interest rates for the fifth time in a row, with experts warning any hesitation could help push the price of petrol higher for squeezed British drivers.
The Bank of England is widely predicted to increase its base rate from 1%, already the highest in 13 years, to 1.25%.
It would be the first time since January 2009 that the rate has been higher than 1%.
The nine-person Monetary Policy Committee (MPC), which sets the rate, will announce its decision on Thursday.
They will want to rein in inflation, which has hit highs not seen for decades.