The UK-based economic forecasting group EY ITEM Club has lowered its forecast for UK growth to 1.3 percent in 2019 and 1.5 percent in 2020, warning prolonged Brexit uncertainties will continue to dent the UK economy in the coming quarters.
“Despite likely solid-looking GDP growth in the first quarter of 2019, the downward revision for 2019 primarily reflects the prolonged Brexit uncertainty, following the decision to delay the UK’s exit from the EU to a flexible Oct. 31 deadline,” EY ITEM Club said in its latest spring forecast.
A weaker global economic environment has also impacted the UK’s growth outlook, it said.
The EY ITEM Club forecast consumer spending growth to slow in the near term, expecting it to grow by 1.4 percent in 2019 and 1.7 percent in 2020. It projected consumer price inflation to average at 1.9 percent in 2019 before rising to 2.0 percent in 2020.
“A notable feature of the economy in 2018 and Q1 2019 was how resilient consumer spending was compared to other sectors. This was underpinned by robust employment growth and improving real earnings growth, particularly since mid-2018. A key question for UK growth prospects is whether this can continue,” said Howard Archer, Chief Economic Adviser to the EY ITEM Club.
“The outlook for the UK economy remains incredibly difficult to forecast. Brexit is one factor but the different and contradictory behavior of individual components such as consumers and businesses means market signals are very hard to understand and there is a real risk of misinterpretation,” said Mark Gregory, EY UK Chief Economist.
The UK economy has been sluggish since the Brexit referendum in 2016, with growth at 1.4 percent in 2018, the weakest since 2012, according to official figures.