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  • Home
  • About
  • Podcast
    • Summaries
    • Articles
  • Invoice Finance
    • Basics
      • What is Invoice Finance?
      • What is Reverse Factoring?
      • What are Trade Receivables?
      • What is the Cash Conversion Cycle?
      • What is Days Inventory Outstanding?
      • What is Days Sales Outstanding?
      • What is Days Payable Outstanding?
    • Advanced
      • Invoice Validation and Fraud Detection
      • Reasons Why Invoice Finance is Better than a Bank Loan
      • How to Choose the Right Factoring Firm for Your Business
      • A Closer Look at Factoring Agreements
      • What is Trade Receivables Securitisation?
      • Breakdown of the Costs for Factoring
    • Factoring
      • Why Companies Use Invoice Factoring
      • What Companies are Suitable for Invoice Factoring?
      • Factoring and Invoice Discounting
      • How Factoring Works
      • Asset Based Lending
      • Is Factoring Right for Your Company?
      • Accounting for Factoring
      • How a Company Enters into a Factoring Agreement
      • The Costs Involved in Factoring
      • Changing Factoring Company
      • The Relationship Between the Factoring Company and the Debtor
      • Legal Aspects of a Factoring Company Pursuing Payment Through the Courts
      • Factoring in the Construction Industry
    • Fraud
      • Types of Invoice Fraud
      • How to Combat Invoice Fraud
    • E-Invoicing
      • Legal Status of Electronic Invoicing
      • The Benefits of E-Invoicing
      • Implementing an E-Invoice System
      • E-Invoicing Adoption in Mexico and The Rest of the World
  • Brokers
    • UK Brokerage Firms
  • Factoring Firms
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      • UK
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      • Germany
      • Italy
      • Spain
      • Holland
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      • Canada
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      • New Zealand
  • Hi-Tech
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    • UK Fintech
    • Articles
      • Enhancing Fintech Interoperability: Digitalizing Trade Documents for Efficiency and Security
      • The 7 Types of AI and Their Implications for the Future
      • Transforming Trade Finance: The Role of AI
      • The Different Programming Languages Used in Fintech Companies and Financial Institutions
      • UK and US Authorities Intervene in AI Sector
      • Web3 Applications and the Future of Trade Finance
      • What is Web 3?
      • What Can Fintech do for You?
      • What is Fintech?
      • Tokenisation of Finance
      • Payment Services in the Invoice Finance Sector
      • What is ChatGPT and Why the Fuss?
  • Rating Agencies
  • Securitisation
    • Deal Arrangers
    • Book Runners
    • Articles
      • The Roles of Deal Arrangers and Book Runners in Securitization
      • What is Trade Receivables Securitisation?
      • The Appeal of Trade Receivables Securitisation
      • Risk Mitigation for Trade Receivables Securitisation
  • Legal
    • Law Firms
    • Articles
      • A Guide to Accounts Receivable Purchase Agreements and Invoice Discounting Agreements
      • The Challenges of KYC and AML Checks
      • What is The Model Law on Electronic Transferable Records (MLETR)?
      • Snapshot of Factoring Legal Schemes in England and Wales
      • How are UK Factoring Firms Regulated?
      • What is ISO20022 and Why is it Important?
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      • Financial Crisis or Not?
      • Credit Suisse Bailout
  • Credit Insurers
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    • Articles
      • Credit Insurance Legal Aspects
      • Credit Insurance in Trade Receivables Financing
      • The Benefits of Credit Insurance in Invoice Finance
      • Eligibility Requirements for Capital Relief by Using Credit Insurance
      • What are Export Credits and Country Risk Classifications?
      • How the War in Ukraine Affects the Price of Credit Insurance for Trade Finance
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Home Economy

Economic Forecast for the UK in 2023

John Goodden by John Goodden
January 13, 2023
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Download file | Play in new window | Duration: 5:56 | Recorded on January 3, 2023

The British Chambers of Commerce (BCC) have released on their website their economic forecast for 2023. It does not paint a good picture for the UK economy for the coming year.

Against the backdrop of the conflict in Ukraine and the resulting increase in electricity and gas bills for homes and companies in the UK; the friction in international trade caused by Brexit; the shortage of workers in such sectors as agriculture and logistics; the fall in the value of the pound; and the increasing burden of servicing a swollen national debt it is not surprising that economists are already earmarking 2023 for recession.

Headline Figures

Here are the headline figures for the UK economy for 2023

  • The British Chambers of Commerce forecast that the UK will remain in recession until the last quarter of 2023;
  • UK inflation will remain stubbornly high until Q4 2023 when it is expected to fall to 5%; and
  • The UK economy will make a weak recovery in 2024, with exports, household consumption and business investment remaining subdued.

Five-Quarter Recession

The BCC is forecasting 5 quarters of recession. The starting point was Q4 2022. The BCC agrees with the Office for Budget Responsibility (OBR) and the Bank of England that UK GDP will retract by -1.3% in 2023.

Whereas the OBR and Bank of England predict the economy will grow by 0.5% by the end of Q4 2023, the BCC is a little more optimistic in predicting very modest growth of 0.7%.

A sharp fall in household spending, falling real wages, frozen income tax allowances and higher mortgage payments partly explain these predictions for poor economic growth.

The weak pound might improve exports if it wasn’t for the rising costs for raw materials and parts. The UK economy has shifted in the last two decades to the service economy. This means imports are essential; however, they too will decline as households cut back on unnecessary expenditure.

Business investment will remain sluggish – not helped by budget increases in Corporation Tax. Moreover 2023 is the year marked for changing business rates. Previously they were taken from 2015 property prices. In 2023 this rate will change based on property prices for 2021. That will be a shock for many SMEs.

Inflation Peaks

It looks like inflation peaked in Q4 2022 at 11%. The rampant inflation at the end of 2022 was partly deflated by the government intervention to cap energy prices for households.

The Consumer Price Index (CPI) is expected to slow to 5% by the end of Q4 2023, and finally fall back in line with Bank of England targets of 1.5% by Q4 2024.

This tentative hopeful outlook has to be tempered by the fact that prices will remain high (rather than falling) for consumer goods, raw materials and energy, and thus worker demands for pay rises will continue to be a driver for inflation. This will be exacerbated by the government’s promise to reduce assistance with energy bills in April 2023.

Investment

Overall investment is predicted to fall by 1.8% in 2023 with business investment expected to fall by 3%. While government spending is likely to rise to 4.6% in 2023, household consumption is expected to drop by 2.3%. These figures alone mark 2023 as a bleak year for the UK’s economy. Even the expected upturn in 2024 will not compensate for the 5 consecutive quarters of recession.

Factoring

It is not easy to say for certain how factoring companies will fare in 2023. They did surprisingly well in 2022 despite supply side shortages, rocketing energy prices and geopolitical uncertainty created by Russia’s invasion of Ukraine.

Credit controls, due diligence and reserves will all need to be expertly managed to ensure the factoring sector continues to grow in 2023.

In Summary

It is clear that 2023 will be a difficult year for businesses and households alike. While inflation might come down, prices will remain stubbornly high. GDP will go down until Q4 2023 when the economy will nudge into the black with a rise of 0.1%.

Recent government budgets have not reassured businesses. They are reluctant to invest until the government announces spending on training and infrastructure and green jobs. Bizarre and disparate ‘levelling up’ promises by the government are not instilling confidence in business leaders to invest.

There must be a general election either in 2023 or early 2024. A change of government could quickly improve business confidence. However, I will not linger over my crystal ball, as giving false hope is cruel.

Tags: Bank of EnglandBritish Chambers of Commercebusiness ratesconsumer price indexCorporation TaxforecastGDPinflationinterestOffice for Budget Responsibilityrecession
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  • Home
  • About
  • Podcast
    • Summaries
    • Articles
  • Invoice Finance
    • Basics
      • What is Invoice Finance?
      • What is Reverse Factoring?
      • What are Trade Receivables?
      • What is the Cash Conversion Cycle?
      • What is Days Inventory Outstanding?
      • What is Days Sales Outstanding?
      • What is Days Payable Outstanding?
    • Advanced
      • Invoice Validation and Fraud Detection
      • Reasons Why Invoice Finance is Better than a Bank Loan
      • How to Choose the Right Factoring Firm for Your Business
      • A Closer Look at Factoring Agreements
      • What is Trade Receivables Securitisation?
      • Breakdown of the Costs for Factoring
    • Factoring
      • Why Companies Use Invoice Factoring
      • What Companies are Suitable for Invoice Factoring?
      • Factoring and Invoice Discounting
      • How Factoring Works
      • Asset Based Lending
      • Is Factoring Right for Your Company?
      • Accounting for Factoring
      • How a Company Enters into a Factoring Agreement
      • The Costs Involved in Factoring
      • Changing Factoring Company
      • The Relationship Between the Factoring Company and the Debtor
      • Legal Aspects of a Factoring Company Pursuing Payment Through the Courts
      • Factoring in the Construction Industry
    • Fraud
      • Types of Invoice Fraud
      • How to Combat Invoice Fraud
    • E-Invoicing
      • Legal Status of Electronic Invoicing
      • The Benefits of E-Invoicing
      • Implementing an E-Invoice System
      • E-Invoicing Adoption in Mexico and The Rest of the World
  • Brokers
    • UK Brokerage Firms
  • Factoring Firms
    • Europe
      • UK
      • France
      • Germany
      • Italy
      • Spain
      • Holland
    • North America
      • USA
      • Canada
    • Australasia
      • Australia
      • New Zealand
  • Hi-Tech
    • Digital Platform/IT/Software Providers
    • UK Fintech
    • Articles
      • Enhancing Fintech Interoperability: Digitalizing Trade Documents for Efficiency and Security
      • The 7 Types of AI and Their Implications for the Future
      • Transforming Trade Finance: The Role of AI
      • The Different Programming Languages Used in Fintech Companies and Financial Institutions
      • UK and US Authorities Intervene in AI Sector
      • Web3 Applications and the Future of Trade Finance
      • What is Web 3?
      • What Can Fintech do for You?
      • What is Fintech?
      • Tokenisation of Finance
      • Payment Services in the Invoice Finance Sector
      • What is ChatGPT and Why the Fuss?
  • Rating Agencies
  • Securitisation
    • Deal Arrangers
    • Book Runners
    • Articles
      • The Roles of Deal Arrangers and Book Runners in Securitization
      • What is Trade Receivables Securitisation?
      • The Appeal of Trade Receivables Securitisation
      • Risk Mitigation for Trade Receivables Securitisation
  • Legal
    • Law Firms
    • Articles
      • A Guide to Accounts Receivable Purchase Agreements and Invoice Discounting Agreements
      • The Challenges of KYC and AML Checks
      • What is The Model Law on Electronic Transferable Records (MLETR)?
      • Snapshot of Factoring Legal Schemes in England and Wales
      • How are UK Factoring Firms Regulated?
      • What is ISO20022 and Why is it Important?
  • Rates
  • Economy
    • Economic Indicators
    • Articles
      • The Collapse of the Russian Rouble: An Historical Analysis and Current Implications
      • The Current State of the UK Economy
      • Economic Forecast for the UK in 2023
      • Economic News for 2022
      • Financial Crisis or Not?
      • Credit Suisse Bailout
  • Credit Insurers
    • Credit Insurers
    • Articles
      • Credit Insurance Legal Aspects
      • Credit Insurance in Trade Receivables Financing
      • The Benefits of Credit Insurance in Invoice Finance
      • Eligibility Requirements for Capital Relief by Using Credit Insurance
      • What are Export Credits and Country Risk Classifications?
      • How the War in Ukraine Affects the Price of Credit Insurance for Trade Finance
  • Associations
  • ESG
    • ESG Articles
    • ESG Resources
  • Crypto Finance
    • Ripple (XRP) Wins Latest Battle with SEC
    • UK Passes Financial Services and Markets Act 2023
    • Latest about the UK Regulatory Proposal for Crypto Assets
    • How will MiCA (Markets in Crypto Assets) Regulation Affect Trade Finance and the Banking System?
    • Markets in Crypto Act (MiCA) Becomes EU Law
    • An Introduction to EU’s Markets in Crypto-Assets (MiCA) Law 
    • Supply Chains and Blockchain Technology
    • The DeFi Revolution
    • How DeFi Fulfils the Functions of Finance
    • Taxonomy of Crypto Assets
    • Crypto Currencies
  • Interviews
    • Interview with Tradeshift
    • Interview with Kyriba
    • Interview with Orbian
    • Interview with Crossflow
    • Interview with Dancerace
    • Interview with BlackLine
    • Interview with Novicap Part One
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    • Interview with vabble
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