A leading business group has downgraded its forecast for economic growth amid predictions of a “sharp slowdown” in the aftermath of the EU referendum result.
The British Chambers of Commerce (BCC) warned that mounting uncertainty was likely to hit investment at the same time as consumer spending was being “stifled”.
The organisation said the UK was likely to avoid a recession, but it warned that firms were still digesting the referendum result.
Growth prospects will also be hit by uncertainty surrounding the UK’s long-term political arrangements with the EU, said the BCC.
It downgraded its growth forecast from 2.2% to 1.8% this year, from 2.3% to 1% next year and from 2.4% to 1.8% in 2018.
Export growth is expected to fall to 2.3% this year from 4.8% in 2015, but slowly grow to 4% by 2018, it was predicted.
Dr Adam Marshall, acting director-general of the BCC said: “Although individual businesses continue to report strong trading conditions, the overall picture suggests a sharp slowdown in UK growth lies ahead.
“Our forecast suggests that the UK is likely to avoid a recession, but with the health warning that businesses are still digesting the result of June’s EU referendum and the challenges and opportunities to come.
“The value of Sterling, the shape of future trade relationships, the status of EU nationals in the UK workforce and other factors will all influence business confidence over the coming quarters.
“Stability, clarity and action must continue to be the watchwords for government. Aside from a clear timetable for negotiations with the EU, ministers must act to support business investment and confidence.
“They should start with the long list of business-boosting infrastructure projects that have been put on hold for far too long – including a firm decision on a new airport runway, new nuclear investment, and road and rail schemes.
“We also need to see policies to encourage business investment, such as revisions to our outdated business rates system, which penalises companies for investment in plant and machinery, and hits firms before they have even turned over a penny.”
Suren Thiru, BCC head of economics, added: “The downgrades to our growth forecast confirm that the UK economy is set to enter a turbulent period, with growth expected to weaken materially in the near term.
“Mounting uncertainty is likely to put a brake on investment, while rising inflation and moderately weaker labour market conditions are expected to stifle consumer spending. On the upside, the UK’s net trade position is expected to be boosted by the post-referendum slide in the value of Sterling.”
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