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Leading economists predict gloomy 2018 for business, workers and consumers

2018 is going to be another tough year for workers, consumers, business and industry, leading economists believe (Oli Scarff | Getty Images)
2018 is going to be another tough year for workers, consumers, business and industry, leading economists believe (Oli Scarff | Getty Images)

Leading economists predict a gloomy year ahead for Britain with business investment grinding to a halt, at least one interest rate rise and consumers cutting spending.

In a poll of more than 100 economists, more than half said they expected growth to be no higher than 1.5% this year, weighed down by Brexit worries.

While inflation would come down from its current 3.1%, that could see interest rates rise to 0.5%, or higher.

MORE: British workers’ pay will be ‘astonishingly’ bad for decades, experts warn

The uncertainty of where the UK will be in March 2019 as it exits the European Union – principally, what deals, if any, can be secured with Brussels – will dent both business and consumer confidence, the poll carried out by the Financial Times shows.

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One economist described the UK’s negotiations as an “embarrassing mess” while another said “the incompetence” with which they were being handled could yet have an even larger impact on the economy.

“Time is very short for doing a final trade deal,” Liz Martins of HSBC told the FT. “On the one hand you could argue this points to the UK drifting towards a very soft Norway-style Brexit, but on the other you could say there is still a significant risk of a cliff edge in 2021.”

MORE: No solution in sight for UK’s productivity crisis as small businesses say it is not a priority

Nearly four-fifths of the 111 respondents said they felt no more optimistic, or actually more pessimistic, about the UK’s longer-term economic prospects outside the EU than they did last year.

Brexit worries will continue to dog investment plans, economists believe (Getty Images)
Brexit worries will continue to dog investment plans, economists believe (Getty Images)

Aside from Brexit, the economists were also largely downbeat on the outlook for household finances.

Workers would once again see their wages rise only slightly – and with at least one rise in interest rates, possibly two, during the year and high levels of household debt, most people would be keeping a tight hold on their money.

Business investment would be patchy. Dawn Holland, the head of the global economic monitoring unit at the UN, said she expected the UK to lag behind most of the rest of Europe and other developed nations during 2018.

“While globally conditions for investment have started to improve, business investment in the UK seems to be grinding to a halt,” she told the FT.

MORE: Brexit spurs near doubling of UK domestic deal-making

Nick Bosanquet, a professor of economics at Imperial College in London, also highlighted increases in the minimum wage, rising pension costs, higher business rates and the apprenticeship levy as additional costs many small- to medium-sized enterprises were having to absorb.

These costs would impact how much leeway these companies would have to invest and grow their business.

There was a ray of light offered by the economists, with the majority predicting exporters would do well during 2018 thanks to an increase in global demand in general and the continuing weakness of the pound against rival currencies.