If there’s one thing we can all agree about the EU referendum, it’s that the instability caused by it has far from finished. From the weakened value of the pound to the continued threat of drawn out trade negotiations, it’s very clear that we’ve only just begun to walk the rocky economic path we’ve set ourselves.
Now, the British Chambers of Commerce (BCC) have published their first set of forecasts since the vote to leave the EU, more than halving their GDP growth prediction for 2017, putting growth at just 1%, revised down from 2.3%. If correct, that would mean the worst economic performance in 7 years, matched only by 2009s performance as the UK emerged from the deep recession brought on by the global financial crisis.
If you’ve been following recent news, you might well find this latest warning somewhat out of the blue. After all, didn’t the UK get a boost in exports immediately following the Brexit vote? Well, yes, it did, but the BBC’s gloomy report suggests that businesses are still nervous about the prospect of protracted negotiations and trade deals.
Indeed, the BCC is cautioning against reading too much into the recent positive signs coming out of the manufacturing industry. Businesses like ours who produce JIC fittings and SAE adapters have seen encouraging signs in the weeks following the EU referendum, but Adan Marshall, the BBC’s acting director general said: “Although individual businesses continue to report strong trading conditions, the overall picture suggests a sharp slowdown in UK growth lies ahead,”
“Our forecast suggests that the UK is likely to avoid a recession, but with the health warning that businesses are still digesting the result of June’s EU referendum and the challenges and opportunities to come.”
The group represents a network of 52 chambers around the UK and expects the UK to see quarterly growth of just 0.1% in Q3 and Q4, down from 0.6% in Q2 (before the vote). For 2016 as a whole, the BCC has downgraded their growth forecast from 2.2% to 1.8%. In 2017, they predict a 1% growth before rising gently in 2018 to 1.8%.
Keeping British GDP down are a number of factors, from the value of sterling, the form that future trade relationships take and the status of EU nationals in the UK workforce. As of yet, the Government have remained tight lipped around their plans for almost every aspect of a post-Brexit Britain. Trade, free movement and immigration all have a big impact on the way businesses operate, and if the UK is perceived to be taking a step back, it could affect investment in UK businesses.
Businesses now have an eye towards Phillip Hammond’s autumn statement on the 23rd of November, as he lays out how the government plan to weather the Brexit uncertainty through tax and spending alterations. Until then, however, the UK’s manufacturing and business economies soldier on. Only time will tell.