The British Chambers of Commerce (BCC) has today slightly down-graded its three-year outlook for the UK economy, cutting growth expectations from 1.6% to 1.5% in 2017, from 1.2% to 1.1% in 2018, and from 1.4% to 1.3% in 2019.
The slight downgrade to the forecast is mainly driven by a slightly weaker contribution from net trade across the forecast period, while household consumption and business investment are expected to remain sluggish through the forecast period. UK productivity is also forecast to remain subdued.
In the short term, inflation is expected to remain elevated, peaking at 3% in the final quarter of this year, and then moderate slightly as the impact of the post-EU referendum slide in stealing fades. However, inflation is forecast to outpace earnings until 2019, eroding wages and weighing on consumer spending, a key driver of UK economic growth.
With the UK economy expected to continue on a path of slow and sluggish growth, the business group is urging a far stronger focus on ‘fixing the fundamentals’ of the UK economy over the coming year – as skills and labour shortages, congested infrastructure, patchy digital connectivity, a slow planning system and high up-front costs stymie investment and stunt productivity improvements.
At the same time, to lift the cloud of uncertainty over business communities, the UK government must do all it can to move negotiations with the EU forward, secure a transition deal and answer business’s practical questions around trade.
Dr Adam Marshall, Director General of the British Chambers of Commerce, said: “Despite pockets of resilience and success, and strong results for some UK firms, the bigger picture is one of slow economic growth amid uncertain trading conditions.
“Clarity on the nature of the UK’s future trading relationship with the EU is needed to ease the cloud of uncertainty that lingers over business communities, and which is undermining many firms’ investment decisions and confidence. Certainty over the course of Brexit would also help to stabilise markets, and reduce the volatility of sterling, which businesses say is increasing their costs.
“Yet even the best possible Brexit deal won’t be worth the paper it’s written on if the government fails to address the many long-standing, and well-known, barriers to growth here at home. Ever-rising upfront costs, a labour market at capacity, growing pressure on land use, and a physical and digital infrastructure in need of investment and expansion, all prevent UK firms from reaching their potential. While the recent Budget made some welcome steps in the right direction, concerted and sustained action to fix the fundamentals is needed to encourage business investment and growth.”
