Analysts at the Big For auditor and professional services company KPMG have warned of weaker economic growth in the UK following Brexit, even though similarly murky projections have been around since at least 2017, and have so far failed to materialise.
Kristian Rouz — Global accounting company KPMG has announced yet another downgrade in its assessment of Britain’s economic growth this year. Analysts cited elevated political tensions, heightened Brexit uncertainty, and a weaker global economy as weighing on the UK’s economic prospects for this year.
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According to a new report from KPMG, the British economy will likely grow by just 1.2 percent, and only if the cabinet of Prime Minister Theresa May is able to strike a divorce agreement with the EU. This is a downgrade from the 1.6-percent growth expected in the previous forecast.
Economists stressed that the combination of Brexit-related uncertainty and fears, the ongoing slowdown in the Eurozone, and more modest economic projections in the US and China will all weigh on the UK’s pace of economic expansion.
“This cocktail of uncertainty and dwindling short-term prospects has also had a knock-on effect on business investment, which has continued to slump and is expected to shrink by 0.2 percent in 2019 as a whole, as businesses choose to further postpone their investment plans,” Yael Selfin of KPMG said.
KPMG’s statement comes in the wake of the auditing firm’s quarterly report, known as the ‘Economic Outlook’ report, which contains a similar message.
In a separate statement, the Confederation of British Industry (CBI), which has continued to voice pro-Remain positions during the Brexit process, said a divorce from the EU constitutes a ‘national emergency’ due to the bleak perception of the economy in the City of London.
“No-deal has to be clearly ruled out, then MPs must finally compromise and deliver a solution that protects jobs, livelihoods and communities across the UK,” Rain Newton-Smith of the CBI said.
However, British lawmakers say Prime Minister May’s proposed Brexit deal is likely to fail in Parliament during the their vote this week. This could push Britain closer to a ‘no-deal’ scenario.
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KPMG has kept its 2020 forecast unchanged at 1.5-percent growth. Experts also said the UK’s consumer spending, which drives more than 70 percent of Albion’s economy, will be growing steadily at 1.4 percent per year in both 2019 and 2020.
Analysts added that the UK’s economy is facing internal problems as well. KPMG’s Yael said decisive structural reform in the UK could reduce its excessive reliance on foreign trade, ties with the EU, or its national currency’s exchange rate.
“Brexit aside, the government needs to focus on the long-standing challenges that have plagued the UK for some time, such as weak productivity and the rising disparity of opportunities across the UK,” Yael stressed.
Still, the data from Office for National Statistics (ONS) suggest Britain’s labour market remains just under ‘full employment’, as the UK’s jobless rate has stood at firmly below 4 percent, and is only expected to increase to at 4.1 percent both this year and next.
KPMG experts also said a ‘no-deal’ Brexit and a return to WTO rules in Britain’s foreign trade could disrupt supply chains in international trade, and would require a quick realignment of the UK’s trading relations with its largest non-EU partners.