British Chambers of Commerce downgrade UK economic forecasts

The UK economy is forecast to slow to a crawl next year as consumer spending weakens and uncertainty sees businesses hold back from investment, according to the first calculations by the British Chambers of Commerce (BCC) since the Brexit vote.

The BCC downgraded its forecasts for the current and following two years as it feels the uncertainty surrounding the UK’s long-term political arrangements with the EU and the timescale of Brexit will "dampen growth prospects towards the end of 2016 and over 2017".

A recession will be avoided, as although the economy will skirt close to decline, the weakness of sterling should help improve the UK’s net trade position.

The BBC quarterly economic forecast, which is run in partnership with Cambridge Econometrics, is that UK gross domestic product (GDP) will grow 1.8% for 2016, cut from its previous 2.2% forecast.

GDP growth is expected to slow sharply in the short-term, with quarter-on-quarter growth in the third and fourth quarter of 2016 forecast to slow down to 0.1%.

For 2017, growth is expected to slow to 1.0% from the 2.3% previously, and to 1.8% in 2018 from the original 2.4% forecast.

The downgrades to the BCC’s forecast imply that the UK economy will be £43.8bn smaller at the end of the forecast period than previously predicted.

"Although individual businesses continue to report strong trading conditions, the overall picture suggests a sharp slowdown in UK growth lies ahead," said Adam Marshall, acting director general of the BCC.

"Our forecast suggests that the UK is likely to avoid a recession, but with the health warning that businesses are still digesting the result of June's EU referendum and the challenges and opportunities to come.

"The value of sterling, the shape of future trade relationships, the status of EU nationals in the UK workforce and other factors will all influence business confidence over the coming quarters.