Little festive cheer for business as Yorkshire risks a lost decade of growth - Beckie Hart

But anyone whose wish list includes a sudden upturn in the region’s economy is in for disappointment – that looks to be beyond even Santa’s powers this year.

The latest CBI Economic Forecast, published yesterday, gives little cause for optimism this Christmas. Indeed, it suggests the woes which have blighted 2022 will continue not just into the new year, but throughout the whole of 2023, with the UK economy due to contract by 0.4 per cent next year.

That spells bad news for all of us, but especially those who are already finding it hard to make ends meet. Whether we’re juggling the family finances or trying to balance the books at work, it’s hard right now.

There was some good news within our forecast though; inflation appears to have peaked. Yes, it will remain high next year, but it will gradually fall over the next 12 months to far more manageable levels than the recent 40-year high of 11.1 per cent.

That will ease some of the financial pressures – but there are opportunities to do more to restore the country’s economic momentum. We must take them; passivity now – with a further year of weak consumer spending on the horizon as incomes are squeezed – is something none of us can afford.

Growth remains the only realistic and sustainable path through this financial crisis – and business investment remains key to achieving it. Private sector spending can provide the impetus needed to drive up productivity and wages, create new jobs and industries, and achieve big ambitions around net zero and levelling up.

As things stand though, we are not doing enough to incentivise the investment we need.

Our forecast shows business investment will remain 9 per cent below its pre-pandemic levels by the end of 2024, hit by both the recession and the end of the Government’s super deduction in the spring.

What this means is that businesses – not only here in Yorkshire & the Humber, but across the UK – are effectively going into hibernation to wait out this period of stagflation, rocketing inflation, negative growth and falling productivity.

But it doesn’t need to be this way. I know from speaking to CEOs across the region that there is a pent-up appetite from our members to grow. They have the means to invest – but they need Government to act too.

That’s why we continue to urge the Prime Minister and Chancellor to use levers of growth to not only ensure this downturn is as short and shallow as possible, but also to address the persistent weakness in investment and productivity.

Chief among those levers is a tool to replace the super deduction. Our analysis has already shown a permanent full allowances regime would unlock an extra £50billion in capital investment per year by the end of the decade – and what a difference that would make.

There is no time to waste. We will see a lost decade of growth if action isn’t taken.

And the consequences of that could be severe for both living standards in our region and the economy’s capacity to grow again over the longer-term.

Beckie Hart is CBI regional director for Yorkshire & Humber