The UK is suffering from the return of the “British disease” of stagflation, a think tank has warned.
The National Institute of Economic and Social Research has predicted that inflation will not fall back to the Bank of England’s 2% target until after 2027, resulting in five years of “lost economic growth”.
Jagjit Chadha, director of the institute, Britain’s oldest independent economics think tank, said the country’s woes had led to the “re-emergence of the British disease” – a reference to the stagflationary trap of the 1970s, when the term was coined.
NIESR’s forecast is far worse than the bank’s own estimates, which suggest inflation will drop to its 2% target at the start of 2025.
It added that the projection would become worse if the bank raised interest rates too high.
NIESR said there was a 60% chance of the UK being in recession by the end of 2024.
