UK economy to enter prolonged period of slow growth, claims EY report

North West expert offers ‘downbeat assessment’ of prospects as rising inflation and sluggish consumer spending will lead to GDP growth of just 0.8% in 2017. Tony McDonough reports.

EY is expecting UK consumer spending to fall
EY is expecting UK consumer spending to fall

Higher inflation and a slowdown in consumer spending will lead to sluggish growth over the next couple of years with one North West expert talking of “downbeat assessment” of prospects.

As business and political leaders head to London to woo potential global investors at the MIPIMUK expo, the EY ITEM Club is forecasting growth of just 0.8% in 2017.

Its autumn forecast says the UK economy has shown greater resilience than many had anticipated since the EU referendum vote.

However, with inflation forecast to accelerate to 2.6% in 2017, before easing back to 1.8% in 2018, consumer spending is expected to slow to 0.5% and 0.9% respectively.

At the same time, uncertainty around the UK’s future relationship with the EU is likely to weigh on corporate confidence, knocking business investment back by more than 2% in 2017, after a fall of 1.5% this year.

As the UK’s trading relationship with the EU becomes clearer, growth in capital spending is forecast to slowly recover to 0.3% in 2018. As a result, the EY ITEM Club forecasts GDP growth of 0.8% in 2017 and 1.4% in 2018.

Simon Allport, North West Senior Partner at EY, said: “The economy has not fallen off a cliff since the referendum, but recent developments have led to a more downbeat assessment of the outlook for the UK.

“In the North West we are working closely with businesses to focus on the opportunities that are available in this region.

“The ongoing focus on the Northern Powerhouse, in particular, continues to drive interest and investment in the North West from both national and international quarters.”

The EY ITEM Club analysis points towards the UK’s exit from the EU being a relatively ‘hard’ one, with the UK post-Article 50 trading with the EU under the World Trade Organisation’s (WTO) rules.

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