The British Chambers of Commerce has released its first economic forecast since the EU referendum and has downgraded its expectations of the country’s GDP growth over the next three years.
The organization, which publishes forecasts every economic quarter, has said it believes the gross domestic product to grow just 1.8% in 2016, down from an expected 2.2% prior to the Brexit result, Sky News reported.
The BCC also forecasts growth of 1% in 2017 (down from 2.3%) and 1.8% in 2018 (down from 2.4%).
It points to weaker consumer spending and a large fall in investment off the back of the ongoing uncertainty with regards to the UK's future within the European Union as the main reasons for the fall.
Suren Thiru, BCC head of economics, said: "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 labor market conditions are expected to stifle consumer spending."
The forecast predicts that export growth will drop this year before picking back up in 2017/2018—although it will remain below the rates of growth seen last year until at least 2019.
Interest Rates
The BCC also highlights the likelihood that a further cut in interest rates could be made before the end of this year, which could have an impact on future forecasts.
"Although individual businesses continue to report strong trading conditions, the overall picture suggests a sharp slowdown in UK growth lies ahead," says Adam Marshall, Acting Director General of the British Chambers of Commerce.
"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.
"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."
In total, the business group said its downgrades implied the UK economy would be £43.8 billion ($58.05 billion) smaller by the end of 2018 than it had expected before the EU vote.
But it said the slide in sterling since the vote should improve the UK's net trade position.
Marshall urged the government to set out "a clear timetable" for negotiations with the EU, and said it should push on with infrastructure projects such as a new airport runway and new nuclear investment to help encourage business spending.
Back to Business
BDO's index of business optimism, which looks at growth six months ahead, rose to 98.7 from 97.9. It said that was well above the 95.0 level which would indicate the start of recessionary conditions, BBC reported.
"After the immediate Brexit scare, businesses are becoming more confident as they start to find that, for most of us, it's back to business as usual," said Peter Hemington from BDO, an accountants and business advisers firm.
"But ongoing uncertainty and the likely longer-term damage if we exit the single market, are concerns which continue to justify government support for growth.
"The government must prioritize taking advantage of cheap borrowing costs to invest in infrastructure and protect the growth of our economy as we move closer to exit negotiations."
Data earlier this month suggested that the services industry—which accounts for nearly 80% of the UK economy—rebounded strongly in August following a shock fall in July immediately after the Brexit vote.
Analysts said the strong growth—which took the services sector back to pre-referendum levels—meant the UK was likely to avoid a recession.
