Low growth predicted in second quarter as Brexit uncertainty and rising costs bite
Two of Britain’s biggest business groups have warned of dismal growth for the second quarter of 2019 as political turmoil and rising costs take a heavy toll on the UK economy.
Downbeat forecasts for the health of the country’s private sector have been laid bare by two major business trade bodies, the British Chambers of Commerce (BCC) and the Confederation of British Industry (CBI), after months of uncertainty over Britain’s imminent departure of the European Union.
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The UK’s manufacturing sector suffered a slowdown in the second quarter while services saw little improvement, prompting experts at the BCC to estimate today that there was “minimal GDP growth in the second quarter of 2019”.
According to the BCC, the balance of manufacturing firms reporting improved domestic orders slumped to a 7-year low in the last three months.
The figures come as a quarterly survey released by the CBI this morning found that optimism about the overall business situation in the financial services sector has continued to fall, although at a slightly slower pace than in the previous three months.
Overall business volumes stabilised after two quarters of consecutive falls, the CBI said, but the greatest drag on growth came from the general insurance, banking (which saw the fastest fall in growth since September 2013) and investment management sectors.
The gloomy findings also echo another CBI forecast on the weekend that found underlying growth would “remain subdued with risks from Brexit and global trade tensions remaining high”.
The CBI said private sector activity in the three months to June contracted at the quickest pace since September 2012, with the balance of firms reporting growth at -13 per cent.
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Rain Newton-Smith, CBI chief economist, said: “There are some temporary factors pushing down activity at the moment, such as companies adjusting their stocks following the Brexit extension, interruptions to car production and poor weather. But underlying activity and confidence is clearly subdued.”
Suren Thiru, head of economics at the BCC, said its new figures “indicate that underlying economic conditions in the UK remain decidedly downbeat, with intensifying uncertainty over Brexit, the rising costs of doing business in the UK and a sluggish global economy combining to suppress key drivers of growth.”