UK economy in 'horrible situation' as recession looms and no chance of tax cuts, experts say

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The UK economy is in a "horrible fiscal impasse" as it heads into recession, with no option to cut taxes or increase public spending to give a boost, said a group of influential economists. said.

The Institute for Fiscal Studies (IFS) has warned that Britain will fall into a “moderate” recession in the first half of 2024, as the struggle for growth persists as Borrowing costs remain high.

It comes as the Bank of England's chief economist warned there was still "work to do" to bring inflation under control in the UK – a hint that the base interest rate could rise further.

The IFS said there was little room for the tax cuts sought by Tory MPs "in the near future", in its assessment of the country's "green budget" public finances, ahead of Chancellor Jeremy Hunt's autumn statement.

Using the analysis. According to Citi, the IFS report warned that the UK would fall into a recession in early 2024 that would last nine months. It also forecasts that gross domestic product (GDP) will fall by 0.7% next year.

“We are in a horrible fiscal impasse,” said Paul Johnson, director of the IFS. “The price for our high debt levels, our failure to stimulate growth and our high borrowing costs is likely to be a prolonged period of high taxes and restrained spending.”

The government by Rishi Sunak could come under pressure to increase his spending. public spending will be higher than planned, the IFS has warned, as it offers a bleak assessment of the situation a Labor government will face if it wins the 2024 general election.

Au- beyond March 2025, it is likely that there will be real impacts on public spending. terms of cuts to the day-to-day budgets of many government departments and a fall in capital spending on public services, the report says.

This comes despite growing pressure to improve services such as the NHS and to commit to spending on areas such as defense and child care.