UK businesses cut growth expectations

The British Chambers of Commerce trimmed its growth expectations for the UK economy due to the continued Brexit uncertainty.

In its report on Monday, the BCC forecast growth of just 1.2% in 2019, down from its earlier 1.3% estimate.

The diversion of resources to prepare for no deal Brexit and the higher costs of doing business in the UK after the divorce is also projected to limit the extent to which investment activity will bounce back over the near term.

Net trade is expected to make a negative contribution to GDP growth over the forecast period, reflecting the lack of clarity on the UK’s future trade arrangements, a weaker global economy in general and ongoing trade tensions between the US and China.

The business lobby group also downgraded its growth forecast for 2020 to 1.3% from 1.5% and published its first forecast for 2021 of 1.4% growth.

If the forecasts are realised it would be the weakest growth in a decade.

Business investment is expected to decline by 1.0% in 2019, the BCC predicted, which would be the weakest outturn since the financial crisis in 2009.

The BCC made its expectations on the belief that the UK will avoid a no-deal scenario regarding Brexit. If Britain were to have a disorderly exit from the bloc, the BCC would have to revise these forecasts.

To boost growth prospects, the BCC advised the government to provide firms with clarity on future conditions and bolster business investment incentives.

Commenting on the forecast, Suren Thiru, the BCC's head of economics, said: “The downgrades to our near-term growth outlook are a further indication that the UK economy is set to remain on a historically weak growth trajectory for some time to come, unless decisive action is taken.

“Brexit uncertainty, the financial squeeze on business and consumers and a slowing global economy are expected to weigh significantly on business investment and trade and limit the extent to which consumer spending will be boosted by a stronger real wage growth.

“The broad nature of the headwinds facing the UK economy is likely to be reflected in widespread weakness across all the main sectors, leaving the UK more exposed to sudden shifts in the economic conditions.”

Responding to the forecast, Adam Marshall, director general of the British Chambers of Commerce, added: “It is clear that political inaction has already had economic consequences, with many firms hitting the brakes on investment and recruitment decisions as a result of ongoing uncertainty.

“Worse still, some companies have moved investment and growth plans as part of their contingency preparations. Some of this investment may never come back to the UK.

“If the UK economy is to have a shot at escaping a Brexit-induced black hole, practical growth issues here at home need to be tackled urgently.