UK growth to slow in the face of political risk – EY ITEM Club
ACCOUNTANCY and advisory firm EY’s ITEM Club says political uncertainty is near the top of the worry list for businesses.
In its autumn forecast, the ITEM Club forecasts GDP growth will slow to 2.4% in 2015 while business investment growth expected to fall to 5.8% in 2015 in light of political uncertainty in the UK and abroad.
But it believes low inflation and interest rates will sustain the economy’s expansion.
Uncertainty around constitutional reforms in the UK, an imminent General Election and the prospect of an EU referendum in 2017 risk undermining the strides that investment made over the past year, when it made up more than half of the growth in demand, EY’s report found.
The report also points to the growing geopolitical risks, in particular those stemming from the situation in Ukraine, which has dented business confidence in the UK’s key European markets.
The ITEM Club’s forecast says business investment will grow by 9% in 2014, before tempering to 5.8% in 2015. GDP growth is predicted to slow to 2.4% in 2015, down from the 3.1% expected this year.
Chris Voogd, partner sponsor for EY ITEM Club in the Midlands, said: “The first wave of investment is now well under way, but on the ground businesses in the Midlands are becoming nervous.
“They are faced with an uncertain domestic political situation, while there are renewed concerns about their key export markets. They haven’t pulled on the reins just yet, but there is a definite sense of caution. This is a time for cool heads.”
