'Messy and disorderly Brexit remains main downside risk' to UK- BCC
By Caoimhe Toman
Date: Monday 17 Jun 2019
(Sharecast News) - The British Chambers of Commerce revised its medium-term growth forecasts for the UK lower, trimming its forecast for the rate of growth in GDP in 2020 to 1.0%, from 1.3%, and to 1.2%, from 1.4%, in 2021, blaming Brexit stockpiling for the downgrades in its latest economic forecasts released on Monday.
Nevertheless it upgraded its growth expectations for the UK in 2019 to 1.3% from 1.2% for the exact same reason.
The rapid stock-building seen in early 2019 meant an immediate boost to UK GDP, but the business lobby group expected that it would come at the cost of more subdued growth in 2020 and 2021 as the unwinding of historically-high inventory levels, coupled with weaker business investment, weighed on economic activity.
UK GDP jumped by 0.5% quarter-on-quarter in the first three months of 2019, but GDP growth was now forecast to slow to 0.0% this time around 2019.
"The continued Brexit impasse, including the growing possibility of a no-deal exit, together with the high upfront cost of doing business in the UK and the running down of excess stock, is expected to suffocate investment activity over the near term," said the report.
The BCC was also anticipating that imports would expand more quickly than exports, penciling in increases of 4.3%, 1.8% and 2.2% for 2019-2021, respectively, versus rates of growth in exports of 1.6%, 1.6% and 1.7%, resulting in a negative contribution from net foreign demand over the forecast period.
And unemployment was seen remaining low by historical standards with average earnings growth expected to outstrip inflation over the period, rising by 3.0%, 2.9% and 3.0% respectively, versus inflation at 2.1% in 2019 and 2020, and 2.0% in 2021.
That led the BCC to bump up its forecast for growth in household consumption for 2019 to 1.4% from 1.3%, followed by growth of 1.4% in 2020 and 1.5% in 2021.
Suren Thiru, head of economics at the British Chambers of Commerce, said: "The revisions to our forecast suggest that the UK economy is likely to remain on a disappointingly subdued growth path for some time to come.
"It is increasingly likely that the temporary boost from historically high stockpiling in Q1, which has marginally improved the growth outlook for this year, will be surpassed over the medium-term by the negative impact from the running down of these inventories.
"A messy and disorderly exit from the EU remains the main downside risk to the UK's economic outlook as the disruption caused would increase the likelihood of the UK's weak growth trajectory translating into a more pronounced deterioration in economic conditions."
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