By Esmée Hardwick-Slack
The British Chambers of Commerce (BCC) have lowered their forecast for GPD growth in 2018 from 1.3% to 1.1% and from 1.4% to 1.3% in 2019. This change is largely due to a weaker outlook for trade and investment. They claim exporters are facing more subdued growth due to continued Brexit uncertainty and slower growth in key markets.
They claim the combination of high upfront costs of doing business in the UK and the ongoing uncertainty over its future relationship with the EU is expected to continue to stifle business investment.
The labour market is expected to continue to be a source of strength for the economy, with the unemployment rate forecasted to remain close to its 40 year low. However, the BCC warns firms will face “significant” skill gaps, undermining their potential to grow. At the same time, workers are unlikely to see any meaningful increase in wages as the gap between pay and price growth is forecast to remain negligible.
Key Points in the forecast:
- UK GPD growth forecast for 2018 is downgraded form 1.3% to 1.1% and in 2019 from 1.4% to 1.3%, before rising to 1.6% in 2020.
- Growth in household consumption for 2018 is expected to slow to 1.0%, before rising to 1.3% in 2019 and 1.7% in 2020, largely unchanged from the previous forecast.
- Average earnings growth will slightly outstrip inflation over the forecast period, with growth of 2.6%, 2.8, and 3.0%, compared with inflation of 2.5%, 2.3%, and 1.8%.
- BCC forecast export growth of 1.7% in 2018 – down from 2.8% in the previous forecast – this is due to revisions of previous data.
- Total investment growth of 1.4% in 2019 and 1.5% in 2020.
- Interest rates expected to rise to 15% by the end of the forecast period, with rate rises expected in 2019 and 2020.
Dr Marshall, Director General of the British Chambers of Commerce (BCC), has stated:
“Despite strong performances by some firms, the UK economy as a whole is set to grow at a snail’s pace. Brexit uncertainty continues to weigh heavily on many firms, as most of the practical questions facing trading businesses remain unanswered.”
He further states that “Businesses need the Brexit negotiations to deliver clarity, precision and results at paces over the coming weeks…Businesses need to know, now, that they can hire the people they need after Brexit – without being tied up in reams of new costly red tape.”
What are your thoughts on the latest BCC forecast? We’d love to hear from you, leave a comment or join the conversation on Twitter.