Growth will be faster than expected but UK needs economic reboot from government says accountancy body

Jasper Jolly
Follow Jasper
Theresa May Visits Teeside On The Conservative Battle Bus
The government should do more to reassure business, according to the ICAEW (Source: Getty)

The government’s failure to address problems in the economy is threatening UK growth, despite an improving outlook over the rest of the year, according to an influential accountancy body.

The UK economy will grow by 1.7 per cent this year, faster than the previously forecast expansion of 1.6 per cent, according to the Institute of Chartered Accountants (ICAEW).

Economic growth slowed in the first quarter to only 0.2 per cent, the slowest in a year, but the current and remaining quarters are expected to show a faster rate of growth, with exports becoming a bigger contributor than in previous years. This would represent only a slight slowdown from the 1.8 per cent GDP growth recorded last year.

Read more: UK economy to slow as prospect of hard Brexit causes jitters, says OECD

Exporters have been boosted by the relative cheapness of British products since the value of sterling fell sharply after the EU referendum almost a year ago, the ICAEW said.

However, government must do more to ensure businesses are confident in the UK economy, the ICAEW said. The fall in sterling has caused problems in other parts of the economy, notably with real wages falling as the higher price of imports pushes up inflation.

ICAEW forecasts show wage growth at two per cent over this year, below the rate of inflation (currently at 2.9 per cent).

Read more: IMF upgrades UK growth forecast yet again

The anticipation of a consequent slowdown in consumer spending and the increasingly uncertain political outlook is making businesses focus on the risks, holding back further economic progress, the ICAEW said.

Michael Izza, ICAEW chief executive, said: “I would like to see the new government put business and the economy at the top of its agenda, doing more to create a climate of optimism and certainty which will help build confidence.

“It also needs to send a clear signal to the rest of the world that Britain continues to be a good place to do business, to invest and to trade. Not to do so could put at risk the economic progress we have made over the last two parliaments.”

Related articles