The British Chambers of Commerce nudged up its forecast for economic growth next year but downgraded the outlook for 2018 due to inflation pressures and ongoing uncertainty as Britain prepares to leave the European Union, it said on Monday.
The BCC modestly revised up its expectations for gross domestic product growth to 1.1 percent for 2017 from 1.0 percent after a stronger-than-expected economic performance following June’s vote to quit the EU which means the economy is likely to grow 2.1 percent this year, roughly its long-run average.
The business group, however, said it expected the current economic momentum to slow over the next two years and downgraded its GDP forecast for 2018 to 1.4 percent from 1.8 percent, as Britain continues its divorce from the EU.
The BCC’s forecast is exactly in line with the consensus among private-sector economists polled by Reuters last week, and their economic analysis is similar..
Weaker economic activity and an erosion of real wage growth triggered by sterling’s post-referendum slide is expected to curb household consumption and business investment, the BCC said.
Inflation is expected to breach the Bank of England’s 2 percent target next year, with a forecast of 2.1 percent in 2017 and 2.4 percent in 2018, the BCC said.
“In the absence of a clear road ahead, many companies have been adopting a ‘business as usual’ approach in the months since the referendum, which has kept conditions buoyant this year and prevented a sharp slowdown in growth,” BCC economist Suren Thiru said.
“While some firms see significant opportunities over the coming months, many others now see increasing uncertainty, which is weighing on their investment expectations and forward confidence.”
The BCC also said it expects business investment to fall by 0.8 percent in 2016, 2.1 percent in 2017 and 0.3 percent in 2018. This represented a less steep decline for 2016 and 2017, but a sharper fall for 2018.
The business group also expects export growth to slow as it believed the benefits of a weaker pound had been overstated.
The pound is trading about 15 percent lower against the dollar after Britain voted to leave the European Union, and about 10 percent weaker against the euro.
On Monday, sterling edged up recovering some ground lost last week as investors braced for what is shaping up to be a busy week with the latest top-tier UK economic data releases and Bank of England policy meeting.
Britain’s benchmark 10-year government bond yield rose to 1.50 percent on Monday for the first time since May, and the two-year spread over comparable German yields hit its widest since late October at 93 basis points.
At 0845 GMT sterling was up 0.2 percent against the dollar at $1.2599 and the euro was down 0.1 percent at 83.91 pence.
Sterling chalked up its first weekly fall against the dollar in four last week, falling 1.1 percent as British lawmakers said they would stick to Prime Minister Theresa May’s timetable for Britain leaving the European Union, dampening investors’ hopes for a delayed Brexit.
This week’s packed UK economic calendar opens on Tuesday with November’s inflation figures, which are expected to show a slight rise to 1.1 percent. Prices are expected to spike much higher next year as sterling’s weakness feeds through.

Source: Arab News