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The leading business group has slightly upgraded its growth forecast for 2019, driven by the exceptionally rapid stock-building early in the year. However, the immediate boost to UK GDP is forecast to come at the cost of more subdued growth in 2020 and 2021 as the unwinding of historically-high inventory levels, coupled with weaker business investment, weigh on economic activity.
Business investment is forecast to contract at a faster rate in 2019 and recover more slowly in 2020 than expected in our previous forecast. The continued Brexit impasse, including the growing possibility of a no-deal exit, together with the high upfront cost of doing business in the UK and the running down of excess stock, is expected to suffocate investment activity over the near term.
Trade is projected to make a negative contribution over the forecast period as exchange rate volatility, Brexit uncertainty and a subdued global economy, weaken trading conditions for UK exporters. In contrast, consumer spending is expected to remain resilient with earnings growth forecast to continue to exceed price growth over the forecast period and unemployment forecasted to remain low by historic standards.
The BCC’s latest forecast is a clear warning sign that the next Prime Minister must set out a clear roadmap for how the political impasse in Westminster can be broken and an agreement reached to prevent further slowdown in the economy. [...]