Economic outlook beginning to look notably more frayed

Comment Martin Flanagan

The economic clouds have become more rain-laden recently. First at the time of the recent Budget, the independent Office for Budget Responsibility threw a pessimistic curve ball with its forecast that UK economic growth will fall to an average 1.4 per cent between 2017 and 2021.

That compares with long-term trend growth of comfortably more than 2 per cent and seven years of austerity. Recent data also shows earnings growth badly trailing inflation (even if it is arguable prices have peaked).

A new survey out yesterday provides no respite, indeed adds to the gloom in one of the most downbeat economic outlooks since the UK voted to quit the European Union in June 2016. Fewer British employers plan to hire extra staff next year due the perceived sharp economic downturn, says the monthly recruitment industry survey from the Recruitment and Employment Confederation (REC).

That is consistent with recent official figures showing a falling number of people in work. REC’S survey of employers showed the net balance of companies planning to add permanent staff in the next 12 months fell to +16 per cent in the three months to November, down from +24 per cent in the same period last year. None thought Britain’s economy was likely to improve in 2018.

Separately, the Chartered Institute of Personnel and Development said there were signs that Britain had already hit peak employment. But there was little evidence that a squeeze on pay would end soon.

Business investment has suffered as employers have sat on their hands as the tortuous Brexit negotiations go on between a beleaguered Conservative government and the EU.

The REC says the message it is getting is that businesses are more focused on the challenges of 2018; few are talking up the opportunities.

Meanwhile, the Confederation of British Industry says nearly two-thirds of companies think Britain is likely to become less attractive for business as it prepares to leave the EU in March 2019.

The only spot of relief is that both surveys were done before Theresa May secured an agreement from Brussels to move Brexit talks on to a second phase looking at their future trading relations.