A sharp fall in consumer spending and business investment is expected to drag Britain’s growth rate down to just 1.3% this year, dispelling hopes that the UK’s sluggish rate of expansion in the first six months will recover in the second half of the year.
According to the consultancy KPMG, Brexit uncertainty will take a bigger toll on the economy than many forecasters, including the Bank of England, expect following a slump in consumer spending from 1.9% last year to 1.2% in 2018 and an even bigger drop in business investment, from 3.4% in 2017 to 0.8% this year.
There is little comfort in the report for workers, who have suffered a fall in incomes over the last year as rising wages failed to keep pace with inflation.
The report warned that despite growing difficulties finding staff, intense pressures on profit margins and Brexit uncertainties would dictate caution.
“If productivity growth remains at around 1% then, as a basic rule of thumb, we would expect wages to rise by around 3% on average,” KPMG said, giving workers only a small real-terms rise over an inflation rate running at 2.3%. [...]
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