Interest rates are also set to increase and the UK GDP will fall, according to the Centre for Economics and Business Research [CEBR]. Their report looked into the possible impact of the Russian invasion of Ukraine on the UK economy.
The Bank of England interest rate is set to average 0.7 percent for the rest of 2022 and 1 percent for 2023 before then moving up to 1.25 percent.
According to the CEBR, the Bank of England “traditionally does not try to respond to one-off shocks”.
“In fact we expect that in the new environment there would be less tightening than we had previously calculated.”
The CEBR described the impact of the war on GDP as “dramatic”, due to the rise in the price of commodities and a reduction in exports globally due to economic sanctions on Russia.
The average household will lose around £2, 553 per year, as disposable incomes will fall by the largest amount since records began in 1995.
The UK GDP is expected to shrink significantly from 4.2 percent to 1.9 percent in 2022, and in 2023 from 2 percent to zero.
The report said: “Cumulatively, this is a reduction in GDP of more than £90 billion.”
The escalation of sanctions on Russia has pushed many Western economies to the “brink of recession”, according to Reuters.
It was reported that a recession in Europe and North America may be “the inevitable price for defending freedom, resisting aggression and upholding international law in Ukraine”.
While it was thought in mid-February that the implementation of sanctions could be “carefully controlled”, and the oil and gas trade could be exempt.
But this plan has “broken down as a result of Russia’s slow progress on the battlefield and immense diplomatic and public pressure on US and European leaders to maximise sanctions swiftly”.
Tory MP Robert Jenrick has warned Brits to prepare for “the most difficult economic year that we’ve seen in our lifetime”, reported the Daily Mail.