Growth forecasts downgraded
Chancellor urged to avoid ‘business as usual’ Budget
Adam Marshall: ‘Chancellor must incentivise business’ (pic: Terry Murden)
The Chancellor has been warned that the Autumn Budget cannot be a ’business as usual’ affair after new data said Britain’s economy is on course for one of its weakest decades on record.
The British Chambers of Commerce (BCC) has today downgraded its growth expectations for the UK economy for 2018 to 1.1% (down from 1.3%) and for 2019 from 1.4% to 1.3%.
It means that by 2020 the UK economy will have experienced its second weakest decade of average annual GDP growth, it says.
The downgrades for the next two years have been largely driven by a weaker outlook for trade and investment.
The BCC says the Chancellor must go “all-out to incentivise and kickstart business investment” at a crucial turning point for the UK.
Dr Adam Marshall, director general of the BCC, said: “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. The lack of precision on the nature of the UK’s future relationship with the EU is lowering expectations for both business investment and export growth.
“The drag effect on investment and trade would intensify in the event of a ‘messy’ and disorderly Brexit. Businesses need the Brexit negotiations to deliver clarity, precision and results at pace over the coming weeks..
“A deal with Brussels won’t deliver stronger UK growth on its own. The Prime Minister and the Chancellor must now pull out all the stops here at home to bolster business confidence, slash costs, and crowd in investment.
“At a time of massive change and uncertainty, business would not forgive a timid ‘business as usual’ Autumn Budget, nor tax hikes that make UK companies less competitive around the world.”
Key points in the forecast:
- UK GDP growth forecast for 2018 is downgraded from 1.3% to 1.1%, and from 1.4% to 1.3% for 2019, before rising to 1.6% in 2020 (unchanged)
- 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 forecasts export growth of 1.7% in 2018 – down from 2.8% in the previous forecast – this is due to revisions of previous data. It expects a negative contribution from trade over the forecast period
- Total investment growth of 1.4% in 2018 (down from 1.8% in the previous forecast) with growth of 1.4% in 2019 and 1.5% in 2020
- Business investment is expected to remain weak, with growth of 1.0% in 2018, 1.2% in 2019, and 1.4% in 2020
- The BCC now anticipates interest rates rising to 1.25% by the end of the forecast period, with rate rises expected in Q1 2019 and Q2 2020.