A new economic forecast has downgraded the country’s growth expectations for this year to 1.2 per cent from 1.3 per cent, with business investment expected to fall by 1.5 per cent in 2019 and by 0.1 per cent in 2020.
The British Chambers of Commerce (BCC) has predicted that productivity in the UK will be more subdued than in its previous outlook, suggesting that by the end of next year the economy will have seen its weakest ten years of average annual productivity growth on record.
Low unemployment and slow business investment will likely hinder productivity, with companies expected to rely more on keeping people on staff than making investments in new technology, in response to current political and economical uncertainty.
Head of economics at the BCC Suren Thiru explained that the prolonged Brexit process and resulting uncertainty – coupled with the ever-present risk of leaving without a deal in place – and a drop in economic conditions around the world will weigh on investment, productivity and trade.
This is especially concerning where productivity is concerned, since this will restrict wage growth, long-term growth potential and living standards.
“The risks to the outlook for the UK economy remained skewed to the downside. A messy and disorderly departure from the EU would palpably increase the likelihood of the UK economy slipping into a marked downturn, particularly given the lack of actionable information that businesses need to help mitigate some of the impacts of a disorderly exit,” he went on to say.
Director-general Adam Marshall made further comments, saying that there’s no getting away from the fact that Brexit has had a real impact on business investment. The government should be trying to reach a negotiated settlement with the EU and getting new incentives for business investment ready, he continued.
The BCC has also published research demonstrating some of the potential consequences of leaving the EU without a deal come the end of October. It was found that should we leave in a no-deal scenario, 24 per cent of firms would revise their investment plans down, with just four per cent revising up.
Not only that but 22 per cent said they would revise their recruitment plans down and 18 per cent said they would move some or all their operations abroad if we left the EU without a deal.
Bigger businesses with more than 50 employees were more likely to revise their investment and recruitment plans downwards, with five per cent reporting that they would revise them upwards.
Are you concerned about the impact that Brexit might have and want to talk to a London business consultant about what you can do, whether we leave with a deal or without one? Get in touch with us today.