British business group lowers UK’s GDP estimates, cuts business investment to 10-year low
The British Chambers of Commerce, a national representative body which represents 75,000 businesses, expects business investment to fall by 1.0% from a year ago in 2019.
British firms are broadly not optimistic on the developments of Brexit and have lowered their forecast on business investment in the country to a 10-year low for this year, the British Chambers of Commerce (BCC) said on Monday. Economic growth for this year was also lowered from the BCC’s earlier estimate, to 1.2%.
The BCC, a national representative body which represents 75,000 businesses, expects business investment to fall by 1.0% from a year ago in 2019. For next year, business investment was expected to grow by 0.6%, and in 2021, up by 1.1%.
Gross domestic product (GDP) forecast for the United Kingdom (UK) was lowered to 1.2%, compared to the earlier estimate of 1.3%. The current growth estimate follows the latest forecast estimate from the Bank of England.
An economic growth at the predicted pace of 1.2% for this year would make it the weakest growth for the UK in a decade, as the country navigates in an environment plagued by Brexit woes and a slowing global growth.
The business group predicts for GDP in 2020 and 2021 to come in at 1.3% and 1.4%, respectively.
‘Political inaction has already had economic consequences, with many firms hitting the brakes on investment and recruitment decisions,’ said Mr Adam Marshall, the director general of BCC.
‘Worse still, some companies have moved investment and growth plans as part of their contingency preparations. Some of this investment may never come back to the UK,’ Mr Marshall added.
In January, British multi-national engineering firm Rolls-Royce moved its jet engine designs to Germany to skip regulatory delays or any disruption on sales after Brexit.
In the same month, British home electronics maker Dyson announced that it will be moving its corporate head office to Singapore, claiming that the move was considered as it caters to the geographical shift in their consumer portfolio.
Brexit will still disrupt businesses even if deal goes through
Even if a Brexit deal is in the horizon, a quick turnaround in investments would be unlikely, said the BCC, as businesses continue to deal with issues such as the diversion of resources to prepare for the risk of a no-deal Brexit, high up-front costs of doing business in Britain, as well as questions over Britain’s future ties to the European Union.
However, a disorderly Brexit is likely to be avoided.
‘A messy and disorderly exit from the EU would do real and lasting damage to the UK’s economic prospects,’ commented Mr Marshall.
UK’s prime minister Theresa May is expected to put forward her Brexit deal yet again this week, asking for lawmakers to back it even though they have already brutally rejected it twice.
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