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Growth ‘to slow’ as UK ‘faces prolonged weakness’

There was more bad news over the future of the UK economy published yesterday with a report by EY’s Item Club expecting the UK to face a prolonged period of weaker growth in the aftermath of the Brexit vote.

It also forecasts that the plunge in the value of the pound will push up prices for consumers, with inflation - which has been below 1% for almost two year - increasing to 2.6% in 2017.

The report said that this, along with falling business investment, would result in much slower growth rates over the next couple of years.


This downbeat report aligns with comments made by Bank of England governor, Mark Carney, on Friday where he stated inflation was likely to be higher over the next few years.

The report expects 2016 UK GDP to expand by 1.9%, before slowing to 0.8% next year ahead of a slight pick-up to 1.4% in 2018.

Peter Spencer, chief economic advisor to the EY Item Club, said: “So far it might look like the economy is taking Brexit in its stride, but this picture is deceptive.

“Sterling's shaky performance this month provides a timely reminder that challenges lie ahead. As inflation returns over the winter it will squeeze household incomes and spending.

“The pressure on consumers and the cautious approach to spending by businesses mean that the UK is facing a period of relatively low growth.”

But an improvement in exports, supported by the cheaper pound, would provide a silver lining, the report added.

“With activity in the domestic market flat, GDP growth will become heavily dependent upon exports next year,” Spencer added.


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