The UK economy is expected to only grow by 1% next year – down from previous predictions of 1.5%, new data shows.
The latest economic forecast from the EY ITEM Club, which analyses official Government data, said GDP is expected to be 1.3% for 2019 but will slow in 2020.
Analysts said the reason for the downgrade from the summer, when a 1.5% growth was predicted, was due to the ramping up of political uncertainties in the UK, with the arrival of a new Prime Minister, a Brexit delay and a General Election.
Even if the UK leaves the EU on January 31 2020, significant uncertainties will remain and will likely limit any immediate boost to economic activity, the report said.
With the UK’s longer-term relationship with the EU likely to be looser than previously expected, the EY ITEM Club has also reduced its GDP growth forecast for 2021 to 2023.
The revised Political Declaration accompanying the Government’s new Withdrawal Agreement suggests the UK is seeking a free-trade deal, with less regulatory alignment than had previously been planned.
If this was to happen, some UK companies could struggle with higher non-tariff barriers when trading with the EU, EY ITEM Club said.
Therefore, growth in 2021 is now at 1.5%, compared with the 1.8% previously predicted in July.
GDP is expected to hit 1.7% in 2022, compared with 1.9%, while 2023’s prediction is a 1.8% boost – down from 2%.
Business investment is also expected to contract by 1.3% in 2019 and remain flat in 2020 as investors wait for political clarity before making any major moves.
EY ITEM Club added the pickup in business investment post-Brexit is expected to be gradual and limited, with expected expenditure returning to growth in the second quarter of 2020 and slowly strengthening as the year progresses.