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S&P Global cuts UK growth forecast, warns over hard Brexit

By Abigail Townsend

Date: Thursday 24 Sep 2020

S&P Global cuts UK growth forecast, warns over hard Brexit

(Sharecast News) - S&P Global has cut its economic forecasts for the UK, predicting a 10% slide this year before conditions start to improve in 2021.
In a report assessing how the eurozone was recovering from the first wave of Covid-19, the credit rating agency said it now expected UK GDP to fall 9.7% in 2020, against a previous forecast made in June for an 8.1% decline.

However, it adopted a more upbeat view of 2021 and is now predicting the economy will grow by 7.9%, up on its earlier forecast of 6.5%.

Brexit remains a key risk for the country, however, S&P warned. The agency said: "A hard Brexit leading to new import and export tariffs, as well as non-tariff trade barriers would add another layer of challenge for European companies, and be especially detrimental for the UK economy."

Outside the UK, S&P said the eurozone had recovered faster than expected from the first wave of the pandemic and it now believes GDP in the bloc will fall by 7.4% this year and rebound by 6.1% in 2021. It also lowered its expectations for unemployment in the eurozone, predicting a peak of 9.1% in 2021.

However, it warned that the region was entering "a tricky period" as government support measures were withdrawn and the European Union's economic reform programme was introduced.

"Liquidity, households' behaviour and demand will be crucial in enabling the European economy to weather this transition, and much could go wrong along the way," it said.

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