The UK economy is expected to grow at a sluggish rate over the next couple of years, with economists warning that growth will remain lacklustre amid Brexit-related uncertainty.
GDP is forecast to grow at 1.5 per cent in 2018 before dropping to 1.3 per cent in 2019, according to the Confederation of British Industry (CBI).
CBI chief economist Rain Newton-Smith expects household spending to remain under pressure from the growing squeeze on wages as Brexit continues to put pressure on business investment.
“But encouragingly, we should see more support from net exports, buoyed by the lower pound and a resurgent global economy,” she said.
Ms Newton-Smith added that the Government’s industrial strategy has the potential to boost living standards but warned the plan needs “consistency and determination” to make it a long-lasting success.
The UK economy is on track for its worst performance since 2009 after growing slower in the third-quarter than it did in the same period a year ago.
The CBI said it also expects the Bank of England to raise interest rates three times over the next two years, reaching 1.25 per cent by the third quarter of 2019.
Living standards in the UK are set to remain under pressure up to 2019, with CPI inflation predicted to peak at 3 per cent in October 2017 – above the Bank of England’s 2 per cent target – before gradually easing back.
The CBI said its forecasts are based on the UK Government achieving an agreement with the European Union on a time-specific transition period for Brexit in early 2019.
Alpesh Paleja, principal economist at the CBI, said a strong global economy could support trade and economic growth in the UK.