Thursday 8 November 2018 12:04 pm

UK will grow as slowly as Italy next year, predicts EU

Reporter at City A.M. covering banking, markets and insurance

Reporter at City A.M. covering banking, markets and insurance

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UK growth could drop to just 1.2 per cent next year, making it the slowest-growing EU member alongside Italy, the European Commission has predicted.

The commission's forecasts for1.2 per cent GDP growth in the UK over the next two years differ from the Office for Budget Responsibility's prediction of 1.6 per cent growth next year and 1.4 per cent growth in 2020.

Britain came bottom of the commission's European economic forecast table alongside Italy, also predicted to have 1.2 per cent growth in 2019.

But the commission said the forecast was based on the assumption that Britain and the EU maintain the “status quo” in terms of trading relations post-Brexit.

A no-deal Brexit would have greater impact on the UK than the EU, the commission said, but described Brexit as a “lose-lose” situation in general.

The commission's economic forecast for the UK warned growth remain subdued through 2019.

The body said: “Private consumption growth is forecast to remain weak as real wages grow modestly and households look to maintain savings.

“Heightened uncertainty means that business investment growth is likely to remain constrained.”

Growth in the euro area will ease from a 10-year high of 2.4 per cent in 2017 to 2.1 per cent this year before slowing again to 1.9 per cent next year and 1.7 per cent in 2020.

The commission's vice-president for euro and social dialogue, Valdis Dombrovskis, said: “All EU economies are set to grow this year and next, which will bring more jobs.

“However, uncertainty and risks, both external and internal, are on the rise and start to take a toll on the pace of economic activity.”

He added: “At national level, there is even a stronger case for building up fiscal buffers and reducing debt while making sure the benefits of growth are also felt by the most vulnerable members of society.”