Written by: Keith Tully
Published: 20th June 2017
Growth within the UK economy will slow over the course of the next few years, partly as a result of uncertainty surrounding Brexit.
That’s according to the Confederation of British Industry (CBI), which is now forecasting the economy to grow at a pace of 1.6 per cent this year and at 1.4 per cent over the course of 2018.
The influential business group points to political uncertainty in Westminster and in relation to the UK’s departure from the European Union as being potentially problematic for the economy.
Other “headwinds” likely to create challenges for UK businesses include a reduction in the growth of household spending, which the CBI expects to see decline during 2017 and 2018.
Consumer spending is expected to be restrained by rises in inflation, the headline figure for which is tipped to increase roughly at current levels of around 2.9 per cent for the next several years.
As far as the recently begun Brexit negotiations are concerned, the CBI wants to see the government “putting trade, jobs and people first”, to offset potential concerns among employers.
Carolyn Fairbairn, director general of the CBI, said in a statement: “The less likely a deal starts to look, the harder it will be for firms to recruit and retain talent as well as push the button on big investment decisions. We must get Brexit right.”
Ms Fairbairn also called for a “renewed focus on the economic fundamentals for this country” and for the newly formed government to “signal loudly and clearly that Britain is a great place to do business”.
However, the CBI is now convinced that the UK will experience a period of cooling in the economy over the next few years as the pace of growth “shifts down a gear”.
GDP expansion made a slower than expected start to 2017 and the economy grew at just 0.2 per cent between January and the end of March.
The CBI expects to see a modest improvement to 0.4 per cent in the overall growth figure for the second quarter of the year.
Rain Newton-Smith, the CBI’s chief economist, has noted that the impact of uncertainty surrounding Brexit could yet be more damaging to the economy that his organisation’s forecasts currently suggest.
“Risks to our forecast remain high,” he said.