The UK economy will continue to grow a year after the EU referendum but the speed will be slower even if the country votes against Brexit, the Confederation of British Industry has warned.
In its latest quarterly forecast, published today, the CBI says the UK will see 2 per cent GDP growth in both 2016 and 2017, but the organisation revised this down from its last forecast where growth was expected to reach 2.3 per cent and 2.1 per cent in 2016 and 2017 respectively.
CBI director-general Carolyn Fairbairn says economic signals are mixed meaning that uncertainty will prevail in the next months.
Fairbairn says: “We expect the UK’s growth path to continue but it is likely to be at a slower rate than previously thought.
“A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms’ plans to invest.”
CBI says growth is expected to be driven by household spending and investment although uncertainties around China and other emerging markets, as well as the looming EU referendum, continue to remain a challenge.
Household spending will remain a major driver of economic growth but it is expected to ease from 2.5 per cent this year to 1.5 per cent in 2017.
However, this will account for around 80 per cent of growth in 2016 and roughly half in 2017, the CBI says.
While investment spending is expected to ease in the near-term, business investment is expected to recover in the second half of 2016.
CBI economics director Rain Newton-Smith says: “With GDP growth softening and commodity prices still low, inflationary pressures remain muted. Referendum uncertainty also appears to be dampening some activity in the near-term, and so put altogether, we do not now expect to see a rise in interest rates before 2017.
“On the global front, momentum is tepid and the picture for some emerging markets remains weak. Growth among the Asian giants is likely to continue to outperform more advanced economies, but financial fragilities in China are still raising concerns.”