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Economy likely to slow down in 2018 with fall in spending and investment

By Ben Woods

Published 18/10/2016

Consumer spending is expected to slowdown in the next few years
Consumer spending is expected to slowdown in the next few years

Britain should brace itself for a growth slowdown in the coming years, as falling consumer spending and business investment applies the brakes to the UK economy, a report said.

Influential think tank EY Item Club said the UK economy will stump up gross domestic product (GDP) growth of 1.9% this year, fuelled by a 2.5% rise in consumer spending on the back of low inflation. However, this performance is expected to fizzle out, as inflation jumps 2.6% next year and 1.8% in 2018, causing consumer spending to slump to 0.5% and 0.9% respectively.

Business investment is also slated to take a hefty knock from uncertainty surrounding Britain's future trading relationship with the EU, dropping 1.5% this year and more than 2% in 2017.

The double whammy impact will cause UK GDP growth to drop sharply to 0.8% next year, before rebounding to 1.4% in 2018.

Peter Spencer, chief economic advisor to the EY Item Club, said: "So far it might look like the economy is taking Brexit in its stride, but this picture is deceptive.

"Sterling's shaky performance this month provides a timely reminder that challenges lie ahead. As inflation returns over the winter it will squeeze household incomes and spending. The pressure on consumers and the cautious approach to spending by businesses mean the UK is facing a period of relatively low growth."

The Office for National Statistics (ONS) revised up its reading for the UK economy in the run-up to the Brexit vote, with GDP growing 0.7% in the second quarter.

Belfast Telegraph

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