Brexit pressures, political uncertainty to hurt growth in 2020: Report

Political uncertainty in the United Kingdom due to impending Brexit and upcoming general elections forced organisations to downgrade their growth forecasts for the next year. The Confederation of British Industry (CBI) predicted the Gross Domestic Product (GDP) to remain at 1.3% and 1.2% for 2019 and 2020 respectively. 

Though the UK business organisation predicted an increase in growth for 2021 with 1.8% GDP, it is based on the assumption that Britain will exit the European Union (EU) on January 31, 2020, that too with a clear line of sight for the trade deal. CBI, in a statement, said that the current forecast is a result of continued Brexit uncertainty and threat of no-deal Brexit. Any further escalation in the ongoing US-China trade war will hit the growth impacting the UK economy.

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Growth driven by household spending

Household spending and an increased contribution from government consumption will drive the growth figures. Household spending is expected to rise by 1.2% in 2019, 1.1% in 2020 and 1.4% in 2021.

“Business continues to show remarkable resilience after more than three years of crippling uncertainty. In that time, firms have continued to go about their day jobs, playing a vital part in driving economic growth,” said Rain Newton-Smith, CBI Chief Economist.

“But they’ve been beset by headwinds. Alongside perennial Brexit uncertainty, they are also contending with softer global demand,” she added.

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Need good Brexit deal

Newton-Smith opined that the new government, after the general elections, should address day-to-day business concerns with a focus on raising productivity and living standards. The chief economist acknowledged that only a good Brexit deal can transform a lost decade of productivity. 

“Let’s be clear: a no-deal Brexit would put the brakes on UK growth and realise businesses’ worst fears. What’s needed is a clear and committed line of sight to an ambitious deal that will protect the UK’s economy and future prosperity,” said Newton-Smith.

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