UK growth is slowing according to the British Chambers of Commerce (BCC) – but not receding. The BCC has cut a projected UK growth forecast for this year from 2.2% to 1.5%. The Brexit vote was given as the reason for this. In March, the BCC had forecast 1.2% growth for 2016, but now expects only 1.8% for this year and 1% for 2017.
There is a great deal of uncertainty regarding the UK’s exit negotiations with the EU. There has yet been no indication of when Article 50 will be triggered by the government. This is sure to affect growth and consumer spending is expected to drop. The BCC stated that while the UK would ‘skirt’ with it, it would avoid recession.
However, the global accountancy and business advisory group, BDO, was more optimistic. This stated the country to be more optimistic of the future. Its index of business optimism, that considers growth over the next six months, rose from a three-year low of 97.9 in July to 98.7. According to BDO, conditions indicative of a contraction begin at 95.0.
Peter Hemington, corporate finance partner at BDO, stated that businesses are finding fundamentally that there has been no change yet – it’s business as usual! Their confidence is increase in after the initial Brexit scare of impending doom and gloom! However, once the UK has left the EU and the single market the situation may change.
Many point out that the UK was doing fine before joining the ‘Common Market’ – before it became a political union. Britain’s issue became not so much regarding free trade as free borders, with droves of immigrants taking advantage of the UK’s generous benefits system. Irrespective of the politics, the British government must progress with supporting growth.
However, as the value of sterling slides, Britain’s trade position improves. It becomes easier to export and many businesses are reporting an improvement in trade. Dr. Adam Marshall, BCC acting director general, says that “the overall picture suggests a sharp slowdown in UK growth likes ahead.”
The UK is still a full member of the EU. Nothing has changed yet, and any issues arising from Brexit apply only once Article 50 has been triggered and the UK exit discussions officially begin. UK growth is still optimistic. The UK government must be well prepared before initiating the exit agreements,. It is only the UK government that can do so. For now, a recession seems unlikely.
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