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UK business lobby cuts forecasts for economy as Brexit looms
[LONDON] The British Chambers of Commerce lowered its forecast for the UK economy for the next two years, citing a weaker outlook for trade and investment on uncertainty over exiting the European Union.
The UK business lobby expects growth of 1.1 per cent this year, down from a previous forecast of 1.3 per cent, and cut its 2019 outlook to 1.3 per cent from 1.4 per cent, according to a statement on Monday.
"The lack of precision on the nature of the UK's future relationship with the EU is lowering expectations for both business investment and export growth," Adam Marshall, director general of the British Chambers of Commerce, said in the statement.
The downgrade comes after the Bank of England lifted its estimate of the economy. However, the bank reiterated that Brexit is the biggest challenge to the outlook and that uncertainty about the U.K.'s future outside the EU had risen.
As the March deadline nears, the UK's future relationship with the bloc remains unclear. The chamber expects business investment to remain weak and average earnings growth to only slightly outstrip inflation.
"The drag effect on investment and trade would intensify in the event of a ‘messy' and disorderly Brexit. Businesses need the Brexit negotiations to deliver clarity, precision and results at pace over the coming weeks," Marshall said.
The UK economy grew at the fastest pace in almost a year from May to July, as construction output rebounded and a heatwave boosted retail sales and the services sector.
However, the UK lobby said high upfront costs of doing business in the UK and the uncertainty over the future relationship with the EU will continue to stifle business investment.