EY ITEM Club Autumn Forecast

The lack of clarity over the future UK and EU relationship will limit any recovery in business investment in the immediate future, finds this report by the EY ITEM Club.

Key points include:

A GDP growth projection of 1.3 percent is still expected for 2019, but growth for 2020 is likely to reduce to 1.0 percent.
The revised political declaration indicates that the UK wants a free-trade agreement with the EU with less regulatory alignment than had previously been planned. This suggests that UK companies will face higher non-tariff frictions when serving EU markets.
GDP contracted 0.2 percent quarter-on-quarter in Q2 2019, and an expansion of around 0.4 percent looks likely to be confirmed for Q3.
The economy is unlikely to be hampered by higher interest rates in 2020. If the Bank of England does act on monetary policy in 2020, it is likely to cut interest rates from 0.75 percent, however, EY believes that rates are most likely to stay at this level through to 2021.

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