"The picture is not as bleak as many think": UBS delivers chunky UK GDP growth upgrade

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Britain's economy is flexible enough to adjust to current "headwinds", UBS said (Source: Getty)

The UK economy today received a big vote of confidence from Swiss banking giant UBS, which upgraded next year's GDP growth forecasts by over a half.

Britain is projected to grow by 1.1 per cent in 2018, UBS said, up from a previous forecast of 0.7 per cent.

And following a slightly stronger-than-expected performance this year, UBS is forecasting 1.5 per cent growth for the UK economy in 2017.

“While weak business investment and falling household spending have driven the overall rate of GDP growth down, the picture is not as bleak as many think," said UBS Wealth Management UK economist Dean Turner.

Brexit uncertainty is undoubtedly having some impact, but businesses and consumers are showing resilience and adapting to the situation as it unfolds. Fundamentally, the UK has a flexible economy which is able to adjust to headwinds.

Read more: Carney speaks on Brexit transition deal, the UK economy, and Meghan Markle

Brexit contingencies

UBS reiterated that its base case for Britain's exit from the EU is that the government will secure a transition deal from negotiations.

Turner said: "We’ve heard plenty of warnings from businesses that they will redirect investment and relocate staff unless they receive clarity on the Brexit state-of-play soon.

"Regardless of an agreement in principle, we would not be surprised to see contingency plans acted on to some extent. Yet even if we do see this movement, it should not be significant enough to bring about a cliff-edge moment for the economy."

He continued: "It is crucial that we do not restrict our lens to Brexit. Factors further from home have the potential to tip the balance, most notably the overall health of the global economy."

Read more: A Budget for Brexit to boost the UK economy

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