Official forecasts of the UK’s economic growth until 2020 have been cut, as economists start to take stock of the medium-term impacts of the UK’s decision to leave the European Union. The lower growth has also prevented the government from running a budget surplus by the end of this Parliament in 2019-20.
The UK’s gross domestic product (GDP) growth expectations for 2016 have been revised up to 2.1 per cent. GDP growth in 2017 is set to be slashed by 0.8 percentage points to 1.4 per cent, according to new forecasts from the Office for Budget Responsibility (OBR), announced in today’s Autumn Statement by chancellor Philip Hammond.
The OBR then forecasts growth of 1.7 per cent in 2018, 2.1 per cent in 2019, 2.1 per cent 2020 and 2 per cent by 2021.
The OBR had previously forecast that GDP growth would be 2.0 per cent in 2016, rising to 2.2 per cent in 2017. That forecast was delivered at the time of March’s Budget, delivered to Parliament by former chancellor George Osborne.
A downgrade in forecasts had been widely expected before the Autumn Statement, as the OBR’s March figures did not take into account the impact of Brexit. Triggering Article 50 to leave the EU – planned for March 2017 – is expected to cause significant uncertainty for UK businesses.
The most recent consensus expectations of economists for GDP growth in 2016 and 2017 were 1.9 per cent and 1.1 per cent respectively.
The longer-term impacts of the UK leaving the EU have not yet become clear, which may have caused the OBR to stick with its previous forecasts on GDP growth in 2019 and 2020, according to analysts.
Adam Chester, head of economics at Lloyds Bank, said: "The surprise is the back end of the forecast – that looks a bit on the optimistic side."
"It's impossible for the OBR to give any clear judgement on the effects of Brexit," he added.