Growth set to falter as spending slows down

Britain should brace itself for a growth slowdown in the coming years as falling consumer spending and business investment applies the brakes to the UK economy, a report said.

Influential think-tank EY Item Club said the UK economy will stump up gross domestic product (GDP) growth of 1.9 per cent this year, fuelled by a 2.5 per cent rise in consumer spending on the back of low inflation.

However, this performance is expected to fizzle out as inflation jumps 2.6 per cent next year and 1.8 per cent in 2018, causing consumer spending to slump to 0.5 per cent and 0.9 per cent respectively.

Business investment is also set to take a knock from uncertainty, dropping 1.5 per cent this year and more than 2 per cent in 2017. The impact will cause UK GDP growth to drop sharply to 0.8 per cent next year, before rebounding to 1.4 per cent in 2018.