The UK is likely to avoid a recession this year, an economic think tank predicted today.
The National Institute of Economic and Social Research (NIESR) said the economy will grow marginally despite high prices hitting household budgets.
But it warned that, while Britain may not fall into recession, it will feel like one for millions of households.
The forecast comes ahead of figures showing how well the UK economy is doing, which are due on Friday.
An economic recession is defined as when the economy shrinks for two consecutive three-month periods.
If a country's economy shrinks, it means it's performing badly and typically, companies make less money and cut jobs leaving the government with less tax revenue to spend on public services.
Economic growth
NIESR has predicted the economy will grow by 0.2% this year, with growth rising to 1% in 2024.
The forecast paints a more optimistic picture than others, such as the Bank of England.
However, the think tank still warned the rising cost of living would mean it would feel like a recession for many people, particular in north-east England and in parts of Scotland, Wales and Northern Ireland.
NIESR said one in four households - some seven million families - would be unable to meet in full their planned energy and food bills from their post-tax income in the 2023-24 financial year, up from around one in five in 2022-23.
Middle-income households would face a hit to their disposable income ranging from 7% to 13%, reaching up to £4,000 in this financial year, its researchers added.
The think tank said that, as many people examine their finances, fewer will be able to retire early, meaning more workers between the ages of 50-64 will return to work.
Back into work
The BBC says the government has been considering plans to coax retired middle-aged workers back into jobs to boost the economy, with 300,000 fewer people in employment than before the pandemic.
The Bank of England said last week the UK is set to enter recession this year, but one which will be shorter and less severe than previously thought. The Bank has raised interest rates to 4% - their highest level in 14 years - in a bid to curb inflation.
- The UK's reputation for financial stability was dented by a year of political turmoil, according to the boss of insurance giant Lloyd's of London.
John Neal said confidence in Britain had been hit by a high turnover of prime ministers and a mini-Budget which saw the pound drop and mortgage rates soar.
He believed the government could recover its credibility by working with business to get it right.
The government said it had taken action to "restore economic stability".
The BBC says that Lloyd's of London is one of the leading financial institutions in the City of London. It insures a variety of risks from all over the world and is sensitive to the UK's reputation.
FTSE 100
The UK's top share index, the FTSE 100, was up 44 points at 7,909 shortly after opening this morning, following yesterday's 28-point gain.
Brent crude futures were up 0.41% at $84.03 a barrel.
Companies reporting today
- Full-year results: Beazley, Equinor, Smurfit Kappa, TotalEnergies
- Half-year results: Barratt Developments, PZ Cussons
- Q1 results: Walt Disney Co