The latest UK economic outlook from KPMG predicts that growth will more than halve to 3.2% this year from 7.4% in 2021, before tumbling to 0.7% in 2023.
Global growth is being hampered by the ongoing Ukraine war and lockdowns in China, which have affected commodity prices and restricted supply, while in the UK the knock-on effect on prices is set to see a sharp drop in household and business spending.
But Yael Selfin, chief economist at KPMG UK, said “weakening domestic momentum” could put the UK at “significant risk of a mild recession”.
She said: “We expect growing external headwinds and wea kening domestic momentum to see economic growth slow significantly over the next year, with a significant risk of a mild recession.”
In its “downside scenario”, KPMG predicts that the UK would see a recession – as defined by gross domestic product (GDP) falling in two or more successive quarters – with output dropping by 1.5% in the year between 2022 quarter three and 2023 quarter three.
It said in this scenario, UK output would fall by 1.1% in 2023, following 3% growth in 2022.
KPMG cautioned the UK faces a number of economic headwinds, including a possible recession in the US caused by aggressive interest rate rises by the Federal Reserve as well as a potential Eurozone recession due to problems with gas supplies amid ongoing tension with Russia, which would both add to falling consumer spending by cash-strapped British households.
Household incomes have already come under significant pressure due to the cost-of-living crisis, with inflation now running at 9.1%.