Economic growth forecast cut amid investment worry

A LEADING business group has downgraded its forecast for economic growth and believes investment will decline this year.

The British Chambers of Commerce (BCC) said it now expects the economy to grow by 1.2 per cent this year, from its previous estimate of 1.3 per cent, and by 0.8 per cent in 2020, down from 1 per cent.

Its GDP growth forecast of 1.2 per cent remains unchanged for 2021.

The business group said it expects that the UK economy will avoid a technical recession and return to modest growth in the third quarter of the year, amid a “continued lack of clarity” over the outcome of Brexit and deteriorating global economic conditions.

Business investment is now forecast to decline by 1.5 per cent this year and by 0.1 per cent in 2020, which together with the decline of 0.4 per cent in 2018, would be the longest period of sustained full-year declines in business investment for 17 years, said the BCC.

Its report said: “Relentless Brexit uncertainty and the diversion of resources by many businesses to guard against the chaos of a messy and disorderly Brexit, are expected to limit investment intentions over the forecast period.”

UK productivity is projected to be more subdued than in previous forecasts, suggesting that by the end of 2020, the economy will have experienced its weakest decade of average annual productivity growth on record, said the BCC.

Adam Marshall, director general of the BCC, said: “Our latest forecast shows a number of warning lights are flashing for the UK economy, even if we are able to avoid a messy and disorderly exit from the EU in just a few weeks’ time.

“There’s no dancing round the fact that Brexit uncertainty has hit business investment hard.

“In addition to reaching a negotiated settlement with the EU, the Government should be preparing big new incentives for business investment in the UK, and should reconfirm its unconditional backing for the big infrastructure projects our economy needs to unlock growth.

“Amidst a slowing global economy and continued political uncertainty, the UK Government needs to use the autumn Budget to back infrastructure, help businesses train and re-skill more people, and cut the high up-front costs of doing business in the UK.”

‘Our latest forecast shows a number of warning lights’