The British Chambers of Commerce (BCC) has updated its economic forecast for growth in the UK for 2017, from 1.4% to 1.5%. However, despite a slight improvement in the forecast for growth in 2017, growth over the next few years is likely to remain ‘anaemic’ and sits under historical averages.
The BCC argues that this snail pace economic growth and uncertain outlook over the next few years, strengthens the case for an overhaul in the conditions of doing business in the UK.
The updated growth forecast comes as a result mainly of a stronger global outlook, including in key markets for UK businesses and although the weaker pound has seen mixed results, it remains likely to boost short-term export activity this year.
Suren Thiru, Head of Economics at the BCC, said: “While we have slightly upgraded our outlook for 2017, our current forecast points to several years of subdued activity in the UK economy, with economic growth under-performing its historic average.”
Rising inflation will remain a key concern for businesses and consumers and is anticipated to peak at 3.4%. In real terms, this will mean that average earnings and wage growth will stay the same which will see consumer spending remain weak over the next few years.
Suren continues: “Consumer spending, a key driver of UK economic growth, is expected to slow considerably as inflation erodes real wages. Business investment is likely to remain relatively subdued as rising inflation and the escalating burden of upfront business costs weigh on investment intentions.
“On the upside, 2017 may prove the sweet spot for exporters as they are boosted by the persistent weakness in the value of sterling and an improving outlook for the global economy.
“Economic growth is expected to remain well below historical averages through the forecast period, which reinforces the need to focus on creating the conditions for growth in the UK economy.
“Following an inconclusive General Election, the Chamber Network is calling for a cross-party focus on supporting business in all parts of the United Kingdom over the crucial months and years ahead.”
Weakened economic growth will add to the concerns experienced by businesses, especially in the wake of Brexit and uncertainty over how it will effect growth and prosperity.
Dr Adam Marshall, Director General of the British Chambers of Commerce, said: “Over recent months, many of the businesses I speak to have expressed cautious optimism for their own prospects, but remain wary about the growth prospects of the UK economy as a whole.
“In the wake of an inconclusive General Election, that wariness is set to increase – as is the sense that the UK economy is merely treading water. With inflationary pressures expected to intensify and consumer spending forecast to slow, this outlook is likely to persist in the near term.
“While the recent election campaign had almost no focus on supporting business, action to boost business confidence and growth remains urgent. A cross-party consensus must be sought in
Westminster in order to create a UK business environment that supports sustained growth and job creation, even as the new government works to secure the best possible Brexit deal with the EU.
“The cost of doing business in the UK is too high – and weighs on the investment, recruitment and growth capabilities of our firms. Companies are faced with significant currency fluctuations and rising upfront costs, and their growth efforts are hampered by skills shortages and poor physical and digital connectivity.
“Westminster must come together to tackle these issues, which together with a pragmatic and economy-focused Brexit deal, will give business communities the best opportunity to foster lasting growth across the UK.”
