BCC says Brexit vote has done 'more harm than good' to UK economy
(ShareCast News) - A report published on Friday by the British Chambers of Commerce said the fall in sterling since Brexit had failed to lift UK growth, with the referendum vote doing "more harm than good" to the economy.
On the night of 23 June 2016, the pound experienced a record fall which led many leave campaigners to claim it would stimulate exports and the UK's manufacturing sector but, director general of the BCC, Adam Marshall said the group's most recent forecasts had shown otherwise.
"Our forecast suggests that the hoped-for rebalancing of the UK economy towards investment and export is unlikely to materialise in the medium term," said Marshall.
"The rising cost of doing business in the UK, the uncertainty around Brexit, and the constraints created by skills gaps and shoddy infrastructure collectively outweigh any benefit arising from the recent depreciation of sterling. A cheaper currency does not automatically mean an export boom, no matter how some politicians and commentators will it to happen."
The BCC raised its 2017 GDP growth from 1.5% to 1.6% in the forecast, but cut its 2018 outlook to 1.2% from its previous 1.3% figure, driven by lower consumer spending and a weak contribution from net trade as imports were expected to rise more than previously thought.
Suren Thiru, head of economics at the BCC, said: "The changes to our growth forecast suggest that the UK economy is likely to remain on a low-growth trajectory, and will be marginally smaller at the end of the forecast period than we predicted in the second quarter."
"It is increasingly clear that the post-EU referendum slide in the value of sterling has done more harm than good. Inflation is being driven by the sizable increases in the cost of imported raw materials over the past year, and is expected to remain a drag on consumer spending over the near term, with pay growth not expected to outpace price growth until 2019."
Inflation was predicted to peak at 3% in the last three months of the year, although lower than the initial projection of 3.4% the report indicated that inflation would continue to outstrip average nominal wage growth until 2019.