UK economy ‘treading water’ says BCC
BCC director general Adam Marshall said there were no signs on the horizon of a return to healthier levels of growth. It dropped its growth forecast for 2018 to 1.2% from 1.3%. This is significantly more pessimistic than official forecasts from the Bank of England, OBR and International Monetary Fund, all of which put UK growth at between 1.5% and 1.6% for next year.
The BCC said that fall in the pound since the EU referendum had not boosted the economy as expected, with lack of skills gaps and poor infrastructure collectively outweighing any benefit arising from a weaker currency. Exports have not risen as much as expected and UK consumers have not switched away from imported goods.
The business group also said the UK needed a swift Brexit transition deal, or risk a ‘far more marked weakening in economic conditions’.
There was some good news: The BCC expects the economy to expand 1.6% this year, compared with its previous forecast of 1.5%, following stronger household consumption than expected in the first half of the year.
However, the BCC’s pessimistic diagnosis is not universally shared by economists. Richard Jeffrey of Cazenove Capital recently argued that published GDP data understates the true level of economic activity as more and more people are involved in new and fast-growing businesses, particularly in the technology sector. He said it was difficult to account for internet-based products in official statistics and the outlook may be rosier than people think.