The economy will slow next year even if Britain leaves the European Union with a Brexit deal, a new report has predicted, as business investment fails to significantly pick up.
The CBI’s economic forecast is the latest report to suggest that Prime Minister Boris Johnson’s Brexit deal will do little to help the economy in the short term, although it said things look brighter in 2021.
The CBI predicted the UK economy will grow 1.3 per cent in 2019 – its worst performance since the financial crisis – and then just 1.2 per cent in 2020. The business body expected growth to pick up to 1.8 per cent in 2021.
It said these forecasts were based on the assumption that the UK leaves the EU by 31 January 2020 and “has clear line of sight to an ambitious trade deal, involving alignment with EU rules where essential for frictionless trade”.
There is no certainty this would be the case, however. Many Tory Brexiters hope the UK will diverge from EU rules so it can strike trade deals with countries such as the US.
Johnson has argued that the certainty of a Brexit deal will cause a rise in business investment, which has fallen in 2019 due in large part to the country’s political crisis.
The CBI today said it expects business investment to rise just 0.3 per cent in 2020, however.
It is not until 2021 that investment will significantly rise by 2.2 per cent, the organisation said, when business would have some more clarity over the UK’s future trading relationships.
The report from the CBI is the latest to pour cold water on the idea of a Brexit boost for the economy. Last month, the EY Item Club predicted that UK growth would slow to just one per cent next year.
Last week, professor John Van Reenen of the London School of Economics said: “It is a mistake to believe that ‘getting Brexit done’ will improve things.”
He said: “There will be continued uncertainty due to years of negotiation over what form the UK’s future trading relationship with Europe will actually look like.”
Yet CBI chief economist Rain Newton-Smith said a trade agreement with the EU would boost the economy. “If firms can see a close deal with the EU on the horizon, with no further Brexit cliff-edges to worry about, investment will be unlocked,” she said.