The UK economy is set to grow at a slower pace even if the country opts to remain within the European Union, according to the latest forecasts from the Confederation of British Industry. Interest rates are going nowhere this year too, it says.
The business group's quarterly look ahead predicts that the UK will see 2.0% GDP growth in both 2016 and 2017. Both of those calls are downgrades from its last forecast in February (that saw growth of 2.3% and 2.1%, respectively). Growth is expected to be driven, as usual, by household spending and investment. But the deterioration in the global economic outlook, including weaker prospects for China and other emerging markets, continue to represent major challenges, the CBI says.
The softer-than-expected start to this year also contributed in "large part" to the downgrade in GDP growth in 2016.
"There are also signs that uncertainty over the outcome of the EU referendum is having a tangible impact on the spending plans of some firms," the CBI says, even though the central forecast was carried out on the basis of current membership of the 27 member-state body. The CBI supports a vote to 'Remain' on July 23.
"We expect the UK's growth path to continue but it is likely to be at a slower rate than previously thought," Carolyn Fairbairn, CBI Director-General, says in a statement accompanying the forecast release.
"A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms' plans to invest.
"At present, the economic signals are mixed – we are in an unusually uncertain period."
The CBI believes that the timing of a first rise in interest rates won't come until the second quarter of 2017 against a backdrop of slower growth.
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