UK Markets closed

UK’s economic growth weakest since financial crisis, says BCC

Alan Tovey
Subdued consumer spending and business investment was behind the downgrade - Getty Images Europe

The UK’s economic growth rate has been downgraded to just 1.3pc this year by the British Chambers of Commerce, taking it to its weakest level in almost a decade.

The trade body has revised down its forecast by 0.1 points for 2018, with a cut of the same amount for next year, taking it to 1.4pc. The prediction for 2020 was held at 1.6pc growth.

Pessimism over consumer spending, business investment and slower trade are behind the downgrades. 

If the forecast for this year is realised, the BCC said it will be the weakest calendar year for growth since 2009, when the economy was reeling from the impact of the global financial crisis.

Dr Adam Marshall, BCC director-general, said: “A decade on from the start of the financial crisis, the UK now faces another extended period of weak growth amid a backdrop of both domestic and global uncertainty. 

“Our forecast should serve as a wake-up call to government – as it demonstrates that ‘business as usual’ is not an option when it comes to the economy.” 

UK economy grinds to a halt as GDP growth falls to five-year low

He added: “With firms facing ongoing Brexit uncertainty, increasing global protectionism and instability in some parts of the world that will impact on costs and profits, now is the time for more robust action to support business confidence and investment.” 

However, Mr Marshall called on politicians not to let Brexit dominate the agenda. “Brexit cannot be Westminster’s only priority,” he said. “Businesses want to see far more urgency around fixing the fundamentals here at home and a concerted effort to lower the high costs of doing business. The next few years are set to be a testing time for business in the UK. What firms and their employees need is much more visible evidence that ministers are committed to getting the basics right – which would enable business in turn to invest, take risks and grow.” 

Despite a rise in wages, the BCC said it does not expect to see it drive higher spending by consumers, as household budgets remain stretched. Weak productivity in the UK was also set to put a brake on pay growth.

Businesses investment is expected to slow from 2.4pc growth last year to just 0.9pc in 2018, a decline the BCC attributed to the “high upfront cost of doing business in the UK”, as well as uncertainty about the impact of Brexit.

The 'Beast from the East' knocked growth in the first quarter but BCC said that the slowdown was more than just a "soft patch"

Britain’s dominant services sector, which makes up almost 80pc of the country’s economy, is also forecast to drop to a growth rate of 1.2pc in 2018, before rising 1.5pc in 2019 and 1.9pc in 2020 Exports are tipped to grow 2.8pc this year, then at a rate of 2.9pc for the two following years. Imports are forecast to rise 1.7pc in 2018, 2.5pc in 2019, and 3pc in 2020.

Suren Thiru, the trade group’s head of economics, said the prolonged cold weather in the first quarter knocked back growth in Britain’s economy, but added it was “more than just a temporary soft patch”. He added: “UK growth is forecast to remain well below its historic average for the foreseeable future unless action is taken”.

Mr Thiru called on the Government to end its “failure to deal with the long-standing structural issues from weak productivity to the deep imbalances in the UK economy”.