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29 April 2019

The Guardian: Brexit will slow UK economy for rest of 2019, forecaster warns


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The slow-burn impact of Brexit on the British economy will be a drag on growth for the rest of 2019, blocking the Bank of England from raising interest rates, the EY Item Club has warned.


Ahead of the first major policy decision from Threadneedle Street since Theresa May agreed to delay Brexit until the end of October, the EY Item Club said uncertainty over the country’s future would cut the UK’s growth rate.

The delay to resolving Britain’s position in the EU is widely expected to stop the Bank from raising interest rates on Thursday, when it publishes the decision of its monetary policy committee (MPC) and releases its quarterly inflation report.

Mark Carney, the Bank’s governor, will also deliver the MPC’s latest verdict on the strength of the UK economy – his first update since the government officially kickstarted the hunt for his successor last week.

Despite a robust start to the year, the EY Item Club, the only forecasting group to use the Treasury’s model of the economy, said GDP growth had been artificially high due to an unprecedented upswing in stockpiling by firms bracing for a disruptive no-deal Brexit.

The forecasting group downgraded its growth projections for the UK to 1.3% for 2019 and 1.5% for 2020, warning the stronger than anticipated performance at the start of 2019 was likely a “false dawn” for Britain. The economy grew by 1.4% in 2018.

Companies could choose to run down their stockpiles of raw materials, components and finished goods as the cliff-edge risks over no-deal Brexit dissipate, meaning economic growth could be weaker in future.

Howard Archer, the EY Item Club’s chief economic adviser, said: “Delays to Brexit, a difficult domestic economic and political backdrop and slower global economic activity have resulted in a weaker outlook for UK GDP growth this year.” [...]

Full article on The Guardian



© The Guardian


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