The UK’s growth forecast has been cut by the British Chamber of Commerce (BCC) as a result of the Brexit vote. The BCC estimated growth for 2016 to be around 2.2%, now it has cut this forecast to 1.8% in light of uncertainty following the UK’s vote to leave the EU.
They have also cut their predictions for 2017 from 2.3% to only 1%, a huge cut in estimated growth for next year. The BCC referred to the UK’s current negotiations with the EU over its exit as a reason why growth expectations have taken a hit.
The BCC said the negotiations for Brexit would “dampen growth prospects” within the UK. They expect us to edge near a recession but entering into another downturn is not expected at this point.
This downgrading of the UK’s growth forecast suggests the UK economy would be £43.8 billion smaller by the end of 2018 than previously anticipated.
This latest report comes in stark contrast to a report from accountancy and services group BDO, who found business optimism to be improving. This is after falling to a three-year low last month in a direct response to the Brexit vote.
The services sector in particular had a strong August with custom returning back to pre-referendum levels. As the services sector accounts for around 80% of the UK’s economy, it is this growth that should see the UK avoid another recession.
Acting director general of the BCC, Dr Adam Marshall, has urged the government to set out a clear timetable for EU exit negotiations. As a result of the decrease in the pound’s worth, he has also suggested that infrastructure projects should continue in an attempt to encourage businesses to spend.
Speaking to the BBC, Peter Hemington from the BDO agrees that infrastructure projects should continue; “The government must prioritise taking advantage of cheap borrowing costs to invest in infrastructure and protect the growth of our economy as we move closer to exit negotiations.”
The data may be bad news for the UK economy as a whole but good news for certain businesses and sectors. As a result, there are businesses up and down the country that are dealing with the effects of the Brexit vote. Only time will tell whether these businesses survive or fail due to Brexit or whether Brexit has any impact on them at all.