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UK must "pull out the stops" to turn around negative GDP growth forecasts

British Chambers of Commerce issue warning to Downing Street ahead of Autumn budget

Senior officials at the British Chambers of Commerce (BCC) has warned that the UK must "pull out the stops" in the Autumn budget to turn around the current downturn in their GDP growth forecasts for 2018 and 2019. 

 

Adam Marshall, director general at the BCC, has called on the Treasury to increase public spending and infrastructure investment to support business growth whilst backing Number 10 to agree a transition deal with Brussels. 

 

Marshall said, "While some businesses report strong trading conditions, the UK economy as a whole is treading water, and there is no sign on the horizon of a return to healthier levels of growth. Our forecast suggests that the hoped-for rebalancing of the UK economy towards investment and export is unlikely to materialise in the medium term. The rising upfront cost of doing business in the UK, the uncertainty around Brexit, and the constraints created by skills gaps and shoddy infrastructure collectively outweigh any benefit arising from the recent depreciation of Sterling. 

 

The longer Brexit talks continue, the more the Eurozone seems to be strengthening with the European Central Bank predicting growth to rise by 1.5% in 2018 and a further 1.4% in 2019. In contrast, the BCC cut its growth rate forecast for the UK from 1.3% in 2018 and 1.5% in 2019 to 1.2% and 1.4% respectively. 

 

The UK's exporters have been blamed for failing to capitalise on the weak Pound since last June's referendum. 

 

Suren Thiruhead of economics at the BCC'ssaid "The changes to our growth forecast suggest that the UK economy is likely to remain on a low-growth trajectory. It is increasingly clear that the post-EU referendum slide in the value of Sterling has done more harm than good. Inflation is being driven by the sizable increases in the cost of imported raw materials over the past year and is expected to remain a drag on consumer spending over the near term, with pay growth not expected to outpace price growth until 2019." 

 

Mr Thiru added, "While the outlook for UK exporters is for modest growth, imports are expected to grow at a faster rate than we previously forecast, with little evidence that consumers or firms are switching away from imports towards domestic alternatives despite their rising cost. Although there remains considerable uncertainty over the UK’s growth prospects, the risks to our current outlook are to the downside. On Brexit, our forecast implicitly assumes a relatively smooth exit from the EU. A more sudden departure would be likely to trigger a far more marked weakening in economic conditions." 

 

The Eurozone continues to enjoy a successful 2017, with the ECB increasing its growth forecast for this year from 1.9% to 2.2%. At a press conference in Frankfurt, ECB president, Mario Draghi, said "Economic expansion, which accelerated more than expected in the first half of 2017, continues to be solid and broad-based across countries and sectors." If the bloc manages to achieve growth of 2.2% this year it would represent the highest rate of annual growth the eurozone has experienced in a decade.

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