THE Confederation of British Industry is forecasting below-trend growth of 1.8 per cent in 2021 if there is a smooth Brexit transition period and future tariff-free trade, but expansion of only 0.4% in a no-deal scenario.
The yawning variation in projected growth under different scenarios is revealed today in the business organisation’s latest forecasts. Growth for 2019 is expected by the CBI to come in at 1.3%, with expansion slowing to 1.2% next year on its central forecast, before picking up to 1.8%.
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The CBI says: “Our central forecast assumes that a Brexit deal is ratified by January 31, unlocking a smooth transition period. Under this scenario, we assume the UK has clear line of sight to an ambitious deal for all sectors that delivers tariff-free trade and close alignment on rules, with the threat of no deal neutralised, and that negotiations on the future relationship with the EU progress smoothly.”
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It projects growth of 1% in 2020 and 1.6% in 2021 if Brexit uncertainty persists throughout the period. If there is prolonged uncertainty followed by a no-deal departure, the CBI forecasts 2021 growth at 0.4%.
The CBI says: “The main risk to the outlook remains continued Brexit uncertainty, particularly the threat of a no-deal Brexit. On the global front, a further escalation in US-China trade tensions would deliver further hits to world growth and trade, with knock-on impact on the UK economy.”
CBI chief economist Rain Newton-Smith said: “Business continues to show remarkable resilience after more than three years of crippling uncertainty. Firms have continued to go about their day jobs, playing a vital part in driving growth. But they’ve been beset by headwinds. Alongside perennial Brexit uncertainty, they are also contending with softer global demand.
“Should these dual headwinds subside, we expect a gradual pick-up in activity. But the bigger picture is one of fairly modest growth over the next couple of years – growth that should be far better.”
Ms Newton-Smith noted a decade of weak productivity growth and “stop-start investment”.
She added: “Let’s be clear: a no-deal Brexit would put the brakes on UK growth and realise businesses’ worst fears.”
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