The lack of progress on the UK’s trade and investment negotiations with the EU has led ICAEW to slash its 2018 GDP growth forecast for the UK from 1.7% to 1.3%
It says that the economy is likely to experience its weakest growth since 2009 on the back of weak output in the first quarter of 2018 and the recent oil price volatility which is depressing consumer demand.
Most economic indicators point to “sluggish” economy growth, with business investment on hold, the diminishing spare capacity in the workforce potentially forcing up wages, and input price inflation continuing to outstrip selling prices.
Job creation is likely to cool throughout 2018 with total employment growth down by 0.1% to 0.9%.
ICAEW chief executive Michael Izza says that the situation will continue while progress on Brexit remains stalled.
“The US, Australia, Germany and even Greece are expecting growth above 2% and there is a danger that the UK’s sluggish growth will become acceptable at a time when other countries are gathering pace,” he warns.
On the bright side, evidence from ICAEW’s quarterly Business Confidence Monitor shows that optimism among exporting businesses is rising faster than among non-exporters.
Trade and political tensions stirred up by the US could pose a risk but if these come to nothing, then quarterly GDP growth will remain around 0.4% throughout the rest of the year.
Izza urges the government to “make progress with the EU in helping to pave UK business success once Brexit takes place”.
He adds that there are plenty of new opportunities for businesses to take advantage of but the lack of clarity and agreements about the UK’s future outside the EU are “a clear own goal”.