By Lauren Howells.

The UK economy will experience low economic growth for at least the next three years, according to the latest UK economic forecast by economic forecasting group the EY Item Club.

EY Item Club has “trimmed” its GDP growth forecast for 2018 and 2019

In its autumn 2018 forecast, the EY Item Club “trimmed” its GDP growth forecast to 1.3% in 2018 and 1.5% in 2019, down from 1.4% and 1.6% respectively.

It said that this change reflected the “increased uncertainties” that were currently facing the outlook because of the “elevated risk” of the UK exiting the EU without a deal in March next year. As well as the “recent faltering consumer purchasing power” and a “clear loss” of economic momentum in the eurozone during the first half of this year. An uncertain global trade outlook was also cited.  

The EY Item club has said that its forecast is dependent on there being a Brexit deal. It does not have forecast data in the event of the UK and the EU not reaching a deal.

According to the BBC, if this forecast actually happens, it would make 2018 the UK’s “worst year of growth” since the financial crisis.

UK Could Experience Period of Low Growth for at Least Three Years

“…businesses need to recognise this and adjust”

“The UK economy is going to experience a period of low economic growth for at least the next three years, and businesses need to recognise this and adjust,” said EY Item Club chief economist, Mark Gregory.

He warned that businesses should also consider a “sharp downside to the economy” if no deal were to be made between the UK and the EU and advised businesses to make preparations for this.

“Testing the robustness of their businesses, especially cash flow, against a short period of severe disruption followed by a downturn for three or four quarters would be a prudent approach to risk management,” he said. 

He added that even if the Brexit process were to go smoothly, the “cyclical risks” to the UK’s economy mean that this would still be a worthwhile exercise.

“Now is the time to start to think about the future shape of any UK business after 2020.” 

Average earnings and consumer spending growth forecasts also “trimmed”

The EY Item Club’s average earnings growth forecast was also trimmed to 2.7% in 2018 and 3% in 2019, down from 2.9% and 3.1% respectively in their previous forecast.

Consumer spending growth forecasts were also cut to 1.1% for 2018 and 1.4% for 2019.

The group also said it didn’t expect any further interest rate rises from the Bank of England’s Monetary Policy Committee until after the UK’s exit from the EU in March 2019. One hike is forecast in August 2019 and two in 2020.

The EY Item Club had predicted that there would be two interest rate rises in 2018.