In its first economic forecast since the EU referendum, the British Chambers of Commerce (BCC) has downgraded its UK GDP growth forecast from 2.2% to 1.8% in 2016; from 2.3% to 1.0% in 2017 and from 2.4% to 1.8% in 2018.
Weaker consumer spending and a large fall in investment were the main reasons for the downgrades. Uncertainty surrounding the UK’s long-term political arrangements with the EU, as well as the timeline over which any actions will take place, also played a part. However, the BCC expects the UK to avoid recession as the slide in sterling helps its net trade position.
Other Key points in the forecast are as follows:
•Business investment is expected to fall by 2.2% in 2016 and by 3.4% in 2017.
•Export growth is expected to drop to 2.3% in 2016, from 4.8% in 2015, but grow slowly to 3% in 2017 and 4% in 2018.
•Services and consumer spending will remain the key growth drivers of the UK economy through the forecast period.
•Employment growth is expected to slow in 2017, as uncertainty weighs on recruitment intentions.
•A further cut in interest rates is expected by the end of the year.
Dr Adam Marshall, acting director general of the BCC, said: “Stability, clarity and action must continue to be the watchwords for government. Aside from a clear timetable for negotiations with the EU, ministers must act to support business investment and confidence. They should start with the long list of business-boosting infrastructure projects that have been put on hold for far too long – including a firm decision on a new airport runway, new nuclear investment, and road and rail schemes.
“We also need to see policies to encourage business investment, such as revisions to our outdated business rates system, which penalises companies for investment in plant and machinery, and hits firms before they have even turned over a penny.”