Chancellor Philip Hammond has slashed the forecast for UK GDP growth in today’s Autumn Statement to 1.4 per cent in 2017 compared to 2.2 per cent in the March budget.
Overall the Chancellor says Brexit will impact UK GDP by 2.4 percentage points.
Despite the slashed growth forecast, Hammond says the UK is set to be the fastest growing major economy in 2017 and that Brexit had thrown into “sharp relief” the resilience of the UK economy.
He adds that even with its downgraded growth forecast UK GDP would be equal to German GDP and better than French and Italian GDP.
The Autumn Statement will address productivity, the housing shortage and the UK’s economic imbalance, Hammond says.
The forecasts for the years following have also been cut to 1.7 per cent in 2018, and 2.1 per cent for 2019 and 2020. In 2021, Hammond says the forecast currently sits at 2 per cent.
In March the years between 2018 and 2020 had been forecast to see GDP growth of 2.1 per cent.
This year’s Autumn Statement comes exactly five months since the UK voted to leave the European Union.
The forecast for 2016 is 2.1 per cent up from 2 per cent forecast in March.
The economy has held up better than forecast in the immediate aftermath of the Brexit vote.
GDP growth only slowed to 0.5 per cent quarter-on-quarter in the third quarter, buoyed particularly by consumers.
Retail sales have been particularly high in the five months since Brexit, while PMIs across manufacturing, services and construction have also been healthy.
Inflation, projected to next year rise to 2.7 per cent by the Bank of England, is forecast to take a toll on consumers as weak sterling is passed on in higher prices.