UK economy must endure ‘short, sharp shock’ after Brexit vote

The UK economy will have to weather a short, sharp shock, with Brexit uncertainty holding back both business investment and consumer spending, according to a leading economic forecasting group.


As forecasters cut growth expectations, a survey of finance chiefs showed caution increasing since the referendum, and retailers reported fewer shoppers on the high street than a year ago.


Severe dents to confidence mean the post-referendum economy is on “a very different path” from three months ago, said the EY Item Club, a forecasting group that uses Treasury modelling. It has slashed its predictions of economic growth for the next few years.


In April, Item said the UK’s GDP would grow by 2.6% in 2017 – a figure it now expects to be barely 0.4%. It expects the pound to have fallen 15% in a year by the end of 2016, and decline further through the decade.


Consolation for borrowers may come from marginally lower interest rates in the short term, while a severely weakened pound will help exports – although not enough to prevent a significant deterioration in the UK’s prospects.




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