A smooth Brexit this year would mean that the UK can expect steady economic growth, with an improvement in business investment and continuing export growth over the next 2 years, according to the Confederation of British Industry’s (CBI) latest economic forecast.
Underlying growth in the UK economy has largely evolved in line with the CBI’s expectations over the last 6 months. The business group is now predicting GDP growth of 1.3% for 2018, 1.4% in 2019 and 1.6% in 2020. The forecast was carried out on the basis of the UK successfully securing an orderly Brexit in 2019, with the government’s Withdrawal Agreement being ratified.
Carolyn Fairbairn, CBI director-general, said: “An orderly Brexit next year would see the UK enjoy steady economic growth for the next couple of years. But as the range of recent impact studies show, a no deal scenario would blow these figures out of the water, severely hurting businesses, jobs and living standards.
“The government’s deal is not perfect. But it is the only offer on the table that can protect our economy, reduce uncertainty and open up a route to a decent trade deal in the future.
“Business has proved resilient in the face of great uncertainty ever since the referendum. Now – with no deal still a real possibility – nearly all firms with contingency plans will be advancing them in the absence of some resolution to the Brexit process.
“Brexit has sucked the oxygen from the domestic agenda, where there are urgent issues to address. Crucially, improvements in people’s wages will only be sustainable with higher productivity. So firms will want to see the Industrial Strategy accelerate in 2019 and for the government to use its Spending Review to set out a roadmap for delivering on its R&D spending target in partnership with business.”
Business investment growth is expected to remain subdued, as uncertainty around the end-state of the UK’s relationship with the EU puts the brakes on large-scale capital spending. But a modest pick-up is expected over the forecast, as uncertainty lifts – based on the assumption of further progress in negotiations – and the full impact of greater automation spending starts to kick in.