Britain’s economic growth is due to slow in 2019 as political uncertainty bites, professional services giant PwC has said, making it the latest forecaster to predict sluggish growth for the country.
Consumer spending growth is also predicted to slump to 1.4 per cent in 2019, from 1.9 per cent the year before, according to PwC’s latest UK economic outlook report, released today.
UK GDP growth is likely to dip to 1.1 per cent in 2019 before rising to around 1.6 per cent in 2020, PwC said. The company follows the Bank of England, the Office for Budget Responsibility, the Organisation for Economic Co-operation and Development, and other organisations in predicting low growth for the UK.
Consumers are likely to limit spending as stronger real wage growth is offset by concerns about the implications of Brexit, slower projected jobs growth, the prospect of a gradual rise in interest rates and subdued house price growth, PwC said.
“Consumer spending has so far been remarkably resilient to political turmoil, but it has become sufficiently acute for us to expect more cautious spending trends in the first half of this year,” said PwC senior economist Mike Jakeman.
The professional services firm predicted that real household disposable income will pick up to two per cent by 2020, but remain below levels seen before the financial crisis of 2008 as Britain continues its struggle with productivity.
PwC said declining business investment due to uncertainty about Brexit is acting as a drag on the UK’s economic performance. It said that should an orderly exit from the EU be agreed, followed by a transition period, both investment and GDP growth should pick up by 2020.
Senior UK economist at Capital Economics Ruth Gregory said: “The economy does seem to have held up reasonably well given the huge amounts of political uncertainty. Growth was 0.2 per cent in the three months to January, and 1.4 per cent in the year to January, and that was above Germany, France, Italy and Japan.”
“Yesterday's labour market figures suggest the labour market remains a bright spot in the economy,” she said. “Obviously that might be just because Brexit uncertainty has not yet had its full impact on certain hiring decisions, and it might be the case that hiring decisions are less costly to reverse than say spending on new equipment.”
She added: “But all the signs are that the economy is coping pretty well, and consumers and firms do appear to be very well placed to pick up spending, pick up investment again if we do see a Brexit deal.”