The Confederation of British Industry (CBI) is urging the Government to take further action to boost long-term economic growth.
CBI director general Tony Danker says the UK could see a "lost decade of growth" if the Government does not take steps to protect the economy.
While the business group says the Prime Minister and Chancellor succeeded in stabilising financial markets, its latest forecast shows a pessimistic outlook for the UK economy.
The forecast indicates that GDP will shrink by 0.4% in 2023, despite growing by 4.5% by the end of this year. GDP is expected to return to its pre-pandemic levels in Q2 of 2024.
Furthermore, productivity remains 2% below pre-pandemic levels, and business investment is expected to remain 9% lower by the end of 2024.
The CBI claims the UK is suffering from "stagflation", a combination of soaring inflation and economic stagnation.
In order to address this, the Government must tackle skill and worker shortages, and encourage business investment through capital allowances and regulatory changes.
The CBI's Tony Danker said:
"The Prime Minister and Chancellor must use levers of growth to ensure this downturn is as short and shallow as possible, but also to address the persistent weakness in investment and productivity."
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