UK growth will be much weaker than thought previously this year even if a no-deal Brexit is avoided, KPMG projects, with protracted uncertainty over the country’s exit from the European Union weighing on activity.
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The accountancy firm, declaring the EU would remain “central to UK trade for years to come” whatever the Brexit outcome, has cut its 2019 growth forecast from 1.6 per cent in December to 1.2%. It noted this projection was based on a Brexit deal being agreed, and the UK entering a transition period “allowing the UK to be spared from significant changes to its trading relationship with the EU until at least January 2021”.
KPMG said: “The lack of clarity around Brexit and headwinds from the global economy has resulted in a downgrade of the short-term outlook for the UK economy.”
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Yael Selfin, chief economist at KPMG UK, said: “This cocktail of uncertainty and dwindling short-term prospects has also had a knock-on effect on business investment, which has continued to slump and is expected to shrink by 0.2% in 2019, as businesses choose to further postpone plans.”
KPMG said: “Regardless of the outcome of Brexit, the EU will continue to be one of the largest markets for the UK by virtue of its size and proximity. Seven EU countries currently feature among the top-10 largest potential trading partners for the UK, representing 49% of UK’s potential exports market, with Switzerland accounting for another 3%. The two largest world economies, China and the US are the only non-European economies among the top 10.
“Despite Brexit, by 2050, the UK’s largest potential trading partners appear little changed, except for the more prominent role played by large emerging economies.”
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