Buoyant UK may still face recession, says KPMG

The economy was ‘more resilient than expected’ last year but still faces a risk of recession, KPMG has warned.

The accountancy firm said the outlook was brighter in the first half of 2023 as inflation cooled after energy and food prices fell.

While flat GDP growth meant the UK avoided recession at the end of 2022, a squeeze on incomes and interest rate hikes would probably derail short-term momentum. 

The Big Four firm forecast the economy will shrink this year by 0.3 per cent and grow 0.6 per cent in 2024. 

Yael Selfin, chief economist at KPMG UK, said: ‘Despite slightly stronger near-term momentum and the boost from the recent Budget announcements, ongoing tensions in the banking system and the lingering risk of a recession put a question mark around the outlook for the UK.’

Selfin added ‘skills shortages, slowing workforce participation, and ageing population’ dominated long-term economic risks.

KPMG said strikes knocked 0.1 percentage points off final quarter growth in 2022.