By Lauren Howells.
The British Chambers of Commerce (BCC) has decreased its UK growth forecasts for 2018 and 2019 and warned that the UK economy will have experienced its second-weakest decade by 2020.
GDP growth 2018 forecast at 1.1%, down from 1.3%
In an announcement made on Monday, the BCC reported that it was forecasting GDP growth for 2018 at just 1.1%, down from 1.3%. The forecast for 2019 also dropped from 1.4% to 1.3%.
The BCC says that these downgrades have been largely driven by “a weaker outlook for trade and investment”.
Exporters face more subdued growth given the continued Brexit uncertainty and the expected slower growth in key markets, it says. Net trade is expected to make a negative contribution to GDP growth over the forecast period, as a result of this, the BCC claims.
“Persistent economic and political uncertainty”
The BCC expects the “persistent economic and political uncertainty” to “increasingly weigh on investment intentions”, with the high upfront cost of doing business in the UK and the ongoing uncertainty regarding what the UK’s future relationship with the EU will look like, continuing to “stifle business investment”.
The BCC says that the labour market is expected to continue to be a “source of strength” for the UK economy, with the unemployment rate forecasted to stay near its record low, but warns that businesses will continue to face “significant” skills gaps, which will undermine their potential to grow.
For now, it says that workers are “unlikely” to experience meaningful real wage growth, with the gap between price growth and pay, forecast to remain negligible.
Government “must provide precision” on UK and EU relationship
According to the BCC, both Brexit uncertainty and the “ongoing failure to fix domestic fundamentals”, such as a stronger labour supply and physical and digital connectivity, are hurting the UK’s growth prospects.
It says that the government must “provide precision” on what any future relationship with the EU would look like in order to “bolster stronger growth” and answer the practical questions that businesses have, with a ‘messy’, disorderly Brexit only adding to the already-existing uncertainty.
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.”
He added that a deal with the EU on its own would not deliver stronger UK growth and warned that the Prime Minister and the Chancellor now had to
“pull out all the stops here at home to bolster business confidence, slash costs, and crowd in investment”.
Speaking about skills and labour, Marshall said that businesses needed to know that they could hire the people they needed after Brexit “without being tied up in reams of new costly red tape”.