Growth in the UK will lag behind the rest of the world, according to a global trade body which predicts Britain will be hindered by the country’s departure from the European Union.
According to the Organisation for Economic Co-operation and Development (OECD), GDP growth is expected to average between 1 and 1.25 per cent each year over 2017 and 2018, down from this year’s growth forecast of 2 per cent.
Meanwhile, the rest of the world is expected to grow by 3.3 per cent in 2017 and 3.6 per cent in 2018.
“Prospects in the United Kingdom are considerably weaker than set out prior to the vote to exit the European Union,” the report read.
The body said this underperformance comes despite the additional policy support provided by monetary policy and the easing of the fiscal tightening previously planned in 2017 and 2018.
“Uncertainty about the future direction of policy, the relationship between the UK and the EU, and the reaction of the economy remains high, and is likely to persist even beyond an assumed departure from the European Union in 2019," according to the report.
The trade body stated this will weigh on business investment, which is expected to drop sharply over the next two years.
“Some support to exports will be provided by the large sterling depreciation, but this will also raise inflation and damp real income growth.”
The OECD is the latest body to predict a fall in growth prospects, after credit ratings agency Moody’s revised its 2017 prediction for GDP growth in the UK, dropping to 1 per cent from the previous projection of 1.2 per cent.
In the euro area, however, the OECD said growth is projected to remain between 1.5 and 1.75 per cent per year.
But it stated negative effects from weaker demand growth in the UK and uncertainty about the future course of the European Union are also likely to become apparent over the next two years.
