Concerns are mounting over the UK’s future economic growth as the Organisation for Economic Co-Operation and Development (OECD) releases its latest forecasts.
The economic think tank warns uncertainty about the outcome of Brexit negotiations is behind the anticipated slower growth of 1.6% in 2017 versus 1.8% achieved in 2016; with a significant cut in growth expectations to 1% in 2018.
These assumptions are based on the UK joining the World Trade Organisation (WTO) if it fails to get the coveted free trade deal.
The downbeat forecast is supported by Moody’s Investor Services which speculates the UK will be the only G7 economy where growth slows over two years.
OECD thinks higher uncertainty could hamper domestic and foreign investment more than expected, but a better or faster outcome for Brexit negotiations would improve outcomes for the UK.
Higher inflation, which recently exceeded the 2% target by the Bank of England, is another culprit as it reduces real wage growth in a weakening labour market.
UBS strategist John Wraith agrees with the slower growth forecast, flagging that Lloyds Bank reported its sharpest drop in its business barometer gauge from 47 to 27 in May. It marked the largest monthly decline since the Brexit vote last June.
‘At both the consumer and business level, confidence in the UK is on the wane, with surveys suggesting a gradual but persistent loss of momentum,’ says Wraith.
