Get a demo Do I subscribe? News sign-up
Print

UK braces for lower spending in 2017

News, 04 January 2017
Topics

LONDON: Leading economists expect the UK economy to experience a marked slowdown in growth this year as businesses try to rein back on their costs amid uncertainty about the country's post-Brexit prospects.

That is according to the latest annual Financial Times survey of 122 economists, 45% of whom expect UK growth to slow to between 1.1% and 1.5% in 2017, a marked downturn from growth of about 2.1% in 2016.

A further 19% expect growth to fall even further, while just 7% believe growth will remain the same as last year or fractionally slower, and only 3% think growth will accelerate this year.

With the pound depreciating since the UK's landmark decision in June to leave the European Union, inflation is expected to continue to rise, yet household income is not expected to keep pace, which is likely to hit consumer spending.

"We think the uncertain reality will hit home [in 2017], with a fall in investment and slowdown in consumption as inflation erodes real wages," said Liz Martins, UK economist at HSBC.

"Once inflation rises and real wage growth slows considerably, the key driver of growth in the UK economy will be highly constrained," added Noble Francis, Economics Director at the Construction Products Association.

However, some economists have a more positive view of the UK's prospects for 2017, including Marian Bell, a former member of the Bank of England's Monetary Policy Committee.

"UK growth will continue to surprise on the upside in 2017," she said. "The economy is still benefiting from pre-referendum monetary stimulus, boosted by precautionary post-referendum policy loosening and the concomitant fall in sterling, while the impact of Brexit itself has not yet been seen."

Whatever the year brings and whether consumer spending falls or not, the UK government is preparing to launch a major marketing campaign to promote the country to overseas visitors.

The government's worldwide "GREAT" Britain campaign will celebrate a Year of Literary Heroes, including the 20th anniversary of the first Harry Potter book, the 200th anniversary of the death of Jane Austen, and the 125th anniversary of the first Sherlock Holmes collection among other major dates.

Important sporting events, such as the 2017 World Athletics Championships, also will be promoted along with Hull becoming the UK's City of Culture.

It comes as forecasts from VisitBritain, the national tourism agency, suggest spending by overseas visitors will reach £24.1bn this year, up 8% on 2016.

Data sourced from Financial Times, Guardian; additional content by Warc staff

Topics