Prospects for strong demand for wood products in the UK continuing this year and into 2023 look increasingly uncertain. In early May the Bank of England warned that Britain’s economy could plunge into recession before the end of this year.
The gloomy outlook statement came as the Bank’s monetary policy committee (MPC) raised interest rates from 0.75% to 1% to tackle spiralling inflation made worse by Russia’s war in Ukraine and the impact on supply chains from COVID lockdowns in China. With a fresh jump in UK home energy bills expected in October, when a government-imposed cap on energy charges is due to be removed, it forecast inflation would rise above 10% this year, the highest level since 1982.
Squeezed between rising borrowing costs and high levels of inflation, the Bank said that British households this year are likely to suffer the second biggest squeeze on their incomes since records began in 1964.
Economists at the Resolution Foundation said the Bank’s projections showed the average household in Britain would lose about £1,200 this year from the cost of living squeeze, laying the ground for a weaker period of growth ahead as families rein in their spending.
The pound fell sharply after the rate decision as the City reacted to Britain’s weaker economic prospects. Sterling tumbled by almost 3 cents against the dollar on the currency markets and by more than a cent against the euro.
The MPC said the sharp rise in energy costs projected in October this year would likely result in a fall in GDP in the fourth quarter. Although a modest recovery is expected at the start of next year, ensuring two consecutive quarters of falling GDP (the technical definition of a recession) is likely to be avoided, the Bank warned Britain’s economy would shrink by 0.25% over the course of 2023 as a whole, in effect a slow-burn recession.
Reflecting this uncertainty in the wider economy, the UK Construction Products Association (CPA) sees a dramatic slowing in growth in its latest forecast published in early May.
In previous year