Britain’s economic recovery is expected to slow over coming months thanks to staff shortages and supply chain disruption, according to a new forecast from a leading business group.

Official figures show UK GDP grew by 4.8% in the second quarter but the British Chambers of Commerce (BCC) predicts this will slow to 2.8% in the third quarter and 1.6% in the last three months of 2021.

The BCC also warned of the “real danger” that the £12bn National Insurance hike announced this week could further stifle Britain’s bounce back.

BoE governor - Andrew Bailey
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Bank of England governor Andrew Bailey said he feared worker shortages could persist

The warning about the impact of labour shortages comes a day after Bank of England governor Andrew Bailey said he feared the problem could persist.

HGV drivers and meat processing workers are among the areas where shortages have been identified.

Supply issues have affected a number of well-known businesses including Ikea, McDonald’s, Greggs and Wetherspoons.

The BCC’s forecast comes on the same day as a new report from the Recruitment and Employment Confederation (REC) showed recruiters and employers faced an unprecedented decline in the availability of candidates for roles.

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According to the BCC’s new forecast, Britain will still post annual growth of 7.1% for 2021 as a whole, which would be the strongest on records going back to 1949.

However the slowdown in the pace of the recovery – after last year’s pandemic-driven recession – means it is now not expected to reach pre-COVID levels until the first quarter of next year.

Suren Thiru, head of economics at the British Chambers of Commerce, said the economy remained “on course for a historic revival” this year thanks to the release of pent-up consumer demand as well as higher government spending.

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“However, our latest outlook also points to a loss of momentum  in the coming months as staff shortages, supply chain disruption and rising cost pressures limit output from many sectors,” he added.

“A prolonged period of acute supply and staff shortages could derail the recovery by forcing firms into a more permanent reduction in their operating capacity, eroding their ability to fulfil orders and meet customer demand.”

Hannah Essex, the BCC’s co-executive director, said: ”There is a real danger the National Insurance increase announced this week could stifle the recovery.”

The forecast came as the monthly UK report on jobs from the REC and KPMG showed a further rapid increase in hiring in August, spurred by improved confidence in the economic outlook.

At the same time a lack of availability of workers spurred sharp increases in starting salaries.

Neil Carberry, Chief Executive of the REC, said: “The number of staff available to start jobs fell at another new record rate, deepening the current labour shortage.

“Recruiters are working around the clock, placing more people into work than ever as these figures show.

“Switching the entire economy on over the summer has created a unique demand spike, and a short-term crisis.

“But it would be a mistake for businesses to think of this as only a short-term issue.

“A number of factors mean that the UK labour market will remain tight for several years to come.”

Business

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