The British Chamber of Commerce has predicted that the UK’s economic growth slowdown won’t be as bad as previously thought. This is down to better than expected consumer spending, trade and investment.
Though the BCC has been optimistic in some ways, it still remains more pessimistic than the forecasts presented by the International Monetary Fund and the Bank of England.
The BCC predicts that after expanding 1.8% in 2016, the UK economy will grow by 1.4% this year. This is an increase from the previous forecast for this year at 1.1% back in December.
Economic forecasts have generally been low since the UK’s vote to leave the EU which has created a great deal of uncertainty in business, trade and the economy. However, the economy appears to be performing better than previously expected.
Though the recent forecasts are optimistic, this changes by 2018 where the forecasts go down from 1.4% to 1.3%, though in 2019 it goes up to 1.5%.
Adam Marshall, director general of BCC said: “Thanks to the hard work of businesses and the continued resilience of the redoubtable British consumer, the UK economy is likely to grow somewhat more strongly than we’d previously expected during 2017.
“Yet with several years of unspectacular growth ahead, coupled with inflationary pressures and the uncertain outcome of Brexit negotiations, it has never been more important to tackle the longstanding constraints that limit business confidence and growth here at home.”
The BCC’s forecast seems to reflect warnings from thinktanks that the weakness of the pound will affect inflation. The BCC has predicted that inflation will rise from 1.8% to above the 2% target from the Bank of England. By 2018 it’s expected to rise to 2.7%, higher than the initial forecast of 2.4%.
Though the pound has decreased in value, this is good news for exports because it becomes cheaper to buy for the UK. While this has had a positive effect on exports, it is still not the main contributor of economic growth. Consumer spending is having more of an effect on the economy than exports.
Head of economics at the BCC, Suren Thiru said: “The resilience in consumer spending, a key driver of UK growth, will slowly dissipate over the coming months as higher inflation and muted wage growth combine to erode consumer spending power.”
What do you think about the BCC’s forecasts? How has your business been affected by the decreased value of the pound? Let us know your thoughts in the comments section.