Joel Muckett 29 Nov 2017 02:39pm

UK economic growth to slow due to Brexit, OECD says

Economic growth in the UK is predicted to worsen over the next two years due to Brexit, during which time it will be slowest out of all the G7 nations

A report by Organisation for Economic Cooperation and Development’s (OECD’s) Economic Outlook has outlined a sharp decline in Britain’s gross domestic product (GDP) growth, going from 1.5% this year to 1.2% in 2018 and 1.1% in 2019, at which point Japan is expected to overtake it as the slowest growth rate.

The think tank credited the slowdown to “continuing uncertainty over the outcome of negotiations around the decision to leave the European Union and the impact of higher inflation on household purchasing power”.

Though any negative impact from uncertainty would be partly countered by the final outcome of Britain’s exit from the EU, the OECD said it would not be “sufficient enough to prevent a moderate rise in the unemployment rate”.

Additionally, the report warned against further rate rises from the Bank of England.

“Monetary and fiscal policies need to remain accommodative. Inflation has risen to 3%, but in the absence of wage pressures the central bank should look through the temporary inflationary impact of currency depreciation,” it read.

Its forecasts are weaker than the Office for Budget Responsibility’s last week, which expected Britain’s economic growth to be 1.4% in 2018 and 1.3% in 2019.

BDO tax partner Paul Falvey said the predictions signalled more “doom and gloom” for Britain, and that without investment in technology and infrastructure and higher productivity, the country could not achieve growth.

“Last week’s Autumn Budget did little to address any of these areas and with the chancellor’s hands tied in terms of tackling productivity and making any significant investment in public service, the UK is likely to face significant challenges over the next few years,” he said.

Despite forecasts of declined growth for the UK, the OECD projected increases in global GDP growth over the next three years, with the global economy expected to grow by 3.6% this year, 3.7% in 2018 and 3.6% in 2019.