Britain entered 2022 with optimism about the economy, but hopes for a successful year of growth unhampered by Covid restrictions fell short as the cost-of-living crisis took center stage, PA Media reported.

With the worst of the pandemic seemingly behind us, the emergence of skyrocketing inflation soon became the next major threat to the economy, which could lead to Britain slipping back into recession.

Although Bank of England policymakers predicted rising inflation as supply chains struggled to cope with rising demand, they were unprepared for the war in Ukraine and the economic onslaught that followed.

When Britain joined its international neighbors in rejecting Russian gas and oil, energy prices quickly skyrocketed, pushing inflation to levels not seen in more than 40 years.

After starting the year at 5.5%, CPI inflation had already jumped to 7% by March and reached double digits in July.

The ascent did not stop there. Amid forecasts that annual household energy bills this year could reach nearly £3,500, experts predicted that inflation could reach 13.3% by October.

The outlook for 2023 was even worse, as gloomy forecasts at one stage suggested that energy costs would reach £5,400 a year in January 2023 and £7,200 by April.

The bank, which began raising interest rates last December when the so-called inflation beast emerged, began ramping up its response.

Starting the year at 0.25 percent, rates rose rapidly at each of the subsequent meetings throughout the year, including a 0.75 percentage point increase in November, the largest single increase since October 1989.

The rising cost of borrowing further exacerbated the plight of stranded households and businesses, and calls for government intervention and support intensified.

Amid the turmoil at the political level, Britons waited patiently for news of what would happen to the Ofgem price ceiling before the government - during the brief and disastrous reign of former Prime Minister Liz Truss - finally unveiled support for limiting bills to about £2,500 a year.  The move helped put a ceiling on rampant inflation, though it still reached an impressive 41-year high of 11.1% in October.

But instead of helping to take the pressure off borrowers, the market chaos instigated by Ms. Truss and former Chancellor Kwasi Kwarteng caused mortgage rates to soar to highs not seen in decades.

Despite the rapid rollback, the policy is believed to have done some lasting damage to the U.K. economy and public finances, while mortgage rates are still higher than they should be.

Although the British economy initially appeared resilient in the face of broader turmoil, the U.K. economy began to plummet in the third quarter, with gross domestic product (GDP) falling 0.3% and a previously robust job market also showing signs of volatility.

This marked what many expect will be the beginning of a prolonged and painful recession, with experts predicting a 2% drop in output.

Samuel Tombs of Pantheon Macroeconomics predicts that 2023 will be a year of recession.

According to him, GDP is likely to fall by 1.5% year-on-year in 2023, and there will be no sign of recovery until early 2024.

With rates at 3.5 percent at the end of 2022 - a 14-year high - it will further constrain consumer spending, affecting about four million mortgage borrowers who must refinance next year, according to the Bank of England. But the expected recession will also help curb inflation.

EY Item Club's Martin Beck is a bit more optimistic because he thinks households still have some savings accumulated during the Covid that they can use. "So consumer spending is unlikely to fall to the same extent as real income. And the fall in inflation over the next year gives hope for a return to growth in late 2023," he said.