EconomyJun 27 2017

Business group forecasts anaemic growth for UK

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Business group forecasts anaemic growth for UK

The British Chambers of Commerce has revised its UK growth forecasts to show marginal growth in 2017, although levels to 2019 remain well below historical averages.

The business group estimates gradual growth increases of 0.1 percentage point to 1.5 per cent in 2017.

Growth in 2018 and 2019 is expected to remain at 1.3 per cent and 1.5 per cent respectively.

The BCC pointed to strong global outlook growth and a predicted short-term rise in exports later in the year due to the low pound.

Inflation is expected to remain a concern to UK business and the public, and to continue to rise to a five-year high of 3.4 per cent this year.

Interest rates are also expected to begin to shift upwards. The BCC predicted the first increase in rate rise, of 0.25 per cent, will occur in the first quarter of 2018. 

Average earnings growth is expected to remain steady, with real-terms wage growth remaining lower than inflation. This is expected to result in further low levels of consumer spending over the next few years. 

Dr Adam Marshall, director general of the BCC, said: “Over recent months, many of the businesses I speak to have expressed cautious optimism for their own prospects, but remain wary about the growth prospects of the UK economy as a whole.

“In the wake of an inconclusive general election, that wariness is set to increase – as is the sense that the UK economy is merely treading water. With inflationary pressures expected to intensify and consumer spending forecast to slow, this outlook is likely to persist in the near term.

Harry Lomas, chartered wealth manager, David Winter IFA, said: “It’s really difficult to comment on economic growth given Brexit, and I suspect the growth forecasts reflect this. No one wants to stick their neck out right now and say the negotiations will be good and we’ll all benefit from free trade when they could go badly. 

“Certainly we are seeing a lot of clients looking to move into investments given they are earning less than the rate of inflation in their savings accounts, and this is a sensible approach for people who don’t need ready access to their capital.”