UK economy to slow sharply after Brexit, business group warns

The UK economy will slow sharply due to higher inflation, cautious consumers and uncertainty as Britain prepares to exit the European Union, a top business lobby group has warned.

The British Chambers of Commerce (BCC) said Monday it modestly revised up its forecast for economic growth next year but downgraded the outlook for 2018.

The BCC, a national body that represents more than 100,000 businesses, said the UK economy is likely to grow 2.1 percent this year and 1.1 percent in 2017, slightly higher than the 1.0 percent it has expected.

However, the business group said it expected the current economic momentum to slow over the next two years and downgraded its forecast of GDP growth for 2018 to 1.4 percent from 1.8 percent, as Britain continues its divorce from the EU.

Weaker economic activity and an erosion of real wage growth triggered by the pound’s post-referendum slide are expected to curb household consumption, the BCC said.

Inflation is expected to rise by 2.1 percent in 2017 and 2.4 percent in 2018, the BCC said. The group also expects business investment and export growth to fall over the next two years.

"In the absence of a clear road ahead, many companies have been adopting a 'business as usual' approach in the months since the referendum, which has kept conditions buoyant this year and prevented a sharp slowdown in growth," BCC economist Suren Thiru said.

"While some firms see significant opportunities over the coming months, many others now see increasing uncertainty, which is weighing on their investment expectations and forward confidence,” he said.

The BCC's forecast is exactly in line with the consensus among Britain’s largest corporations and private-sector economists.

According to research published on Monday, Britain’s largest public companies are profoundly gloomy about the country’s economic prospects in 2017.

The latest "Boardroom Bellwether" report, published in conjunction with the Financial Times, found that three-quarters of FTSE 350 company secretaries expected economic conditions to deteriorate in the next 12 months.

Just 8 percent expected a "slight" improvement, and none expected a major improvement.

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