The British Chambers of Commerce (BCC) has lowered its UK growth forecast, and warns by 2020 the economy will have experienced its second-weakest decade.
The BCC has lowered its GDP forecast for 2018 from 1.3% to 1.1% and in 2019 from 1.4% to 1.3%. Its forecast for 2020 is unchanged at 1.6% growth.
The downgrades are driven by a weaker outlook for trade and investment.
Exporters face more subdued growth over continued Brexit uncertainty and slower growth in key markets, it says.
It adds that the high upfront cost of doing business in the UK and the ongoing uncertainty over the UK’s future relationship with the EU are expected to continue to stifle business investment.
‘Brexit clarity needed’
“Despite strong performances by some firms, the UK economy as a whole is set to grow at a snail’s pace,” said Dr Adam Marshall, director general of the British Chambers of Commerce.
“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.
“The drag effect on investment and trade would intensify in the event of a ‘messy’ and disorderly Brexit.
“Businesses need the Brexit negotiations to deliver clarity, precision and results at pace over the coming weeks.”
Skills gaps
The BCC says the government must now work to bolster business confidence, slash costs, and encourage business investment.
The labour market is expected to continue to be a source of strength for the economy, with the unemployment rate predicted to remain close to its record low.
But the BCC warns firms will face “significant” skills gaps, undermining their potential to grow.
Meanwhile workers are unlikely to experience meaningful real wage growth as the gap between pay and price growth is forecast to remain negligible.
It says it now sees interest rates reaching 1.25% by 2020.
