World in a new era of low growth and high interest rates, says BlackRock

Mr Brazier says: «We're not going back to the way things were before.» Photo: Jeff Pugh

The world is at risk A new era of low growth and high interest rates, according to BlackRock, the world's largest asset manager.

They warned that inflation would be much more volatile than in recent years – and economies will no longer be able to grow as quickly as in the past without causing prices to rise.

Alex Braser, deputy head of the BlackRock Investment Institute and a former Bank of England official, said: “We are now in a structurally more subdued growth and structurally higher rates than before the pandemic.”

He added: “We will not go back to the way things were before.”

BlackRock, which manages $9.4tn (£7.5tn) in assets, said markets were still adjusting to this new reality. As a result, investors have had to be more selective and precise to make a profit than over the past 15 years, when inflation was mostly low, the report said.

Several major changes such as aging demographics, increased climate investment and the AI ​​race. According to the asset manager, this will lead to higher inflation and make it more volatile.

But the surge in government spending and debt levels since the pandemic is also holding back central banks, BlackRock said in its global forecast for next year. year.

“We see central banks living in an environment of higher inflation amid huge government spending and debt burdens,” the report said.

Mr Brazier warned, that the UK economy's ability to supply goods and services has weakened and geopolitical tensions mean inflation shocks will continue. be more often.

He said: “This is in stark contrast to the last 20 years, when central banks were constantly trying to raise inflation because all inflation measures were aimed at reducing inflation. As the situation changes, we will have to get used to the fact that interest rates in the long term will be much higher than they were before the pandemic.”

It comes as the British Chambers of Commerce (BCC) has warned that investment in the UK will fall next year as a record rise in the minimum wage will lead to higher costs for businesses.

The BCC has cut its forecast for investment in business in the UK next year as companies face higher costs, high interest rates on spending and trading difficulties.

In the summer the company forecast investment would fall by 0.1% in 2024. It now expects business investment to fall by 0.8%.

This would be in stark contrast to the 5.6% growth recorded in 2023.

Vicky Price, chair of the BCC's Economic Advisory Council, said: «Rising the minimum wage early next year will further impact investment pressures among businesses as cost pressures increase.»

Last month Jeremy Hunt, Chancellor , announced a record increase in the National Living Wage of more than £1,800 a year for a full-time worker. He also raised the minimum wage for young people aged 18 to 20. Overall, this will increase the cost of employing 2.7 million workers from April 2024.

Companies also face EU bureaucratic hurdles. Exports are expected to grow by just 0.5% next year, following a contraction of 0.5% in 2023, according to the BCC.

The BCC currently expects the UK economy to grow by 0.4% next year %. That's slightly higher than its previous forecast of 0.3% growth, but the company lowered its 2025 forecast to 0.6% from 0.7%.