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Brexit-related uncertainty leads to deferred investment plans and increased stockbuilding
“Prospects for the UK Economy” taken from the National Institute Economic Review
Pub. Date
25 April, 2019
Pub. Type
Downloads
uk-economy-may-2019Authors
External Authors
Kara, Amit
Hantzsche, Arno
Related Themes
Macro-Economic Modelling and ForecastingTags
Journal
National Institute Economic Review, No. 1, Vol. 248
Publisher
Sage, London
External Resources
Key points
- The UK’s future relationship with the European Union (EU) remains undecided. Brexit-related uncertainty has led to investment plans being deferred and increased stockbuilding.
- Under our main-case forecast, based on a ‘soft’ Brexit and continuing uncertainty, GDP growth continues at around 1½ per cent in 2019 and 2020, broadly in line with potential output growth, and the unemployment rate stays at around 4 per cent.
- CPI inflation is forecast to remain around 2 per cent per annum as faster unit labour cost growth is offset by slower import price inflation. With inflation stable at target, and only limited evidence of domestic inflationary pressure, Bank Rate remains at 0.75 per cent throughout this year before being raised to 1 per cent in the second half of 2020.
- We expect public spending to rise more quickly than currently planned. That, together with the forthcoming reclassification of student loans in the public finances, is likely to mean that the government’s medium-term fiscal objectives will not be met.
- The current account deficit is forecast to fall from 4.2 per cent of GDP in 2019 to around 3 per cent in 2020, as domestic saving picks up relative to investment.
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