United Kingdom Economic Forecast

UK Economic Forecast

November 20, 2018

The economy grew strongly in the third quarter according to recent figures, supported by private consumption, public spending and net exports. Moreover, real earnings growth accelerated notably, as the tight labor market fed wage pressures. Employment growth, however, softened in quarter-on-quarter terms, possibly on rising Brexit uncertainty. Looking to Q4, signs are less positive. In October, both the services and manufacturing PMIs fell, while annual retail sales growth slowed considerably and consumer sentiment worsened. On the fiscal front, the government recently presented an expansionary budget, which should support growth next year thanks to higher spending and tax cuts. In mid-November, the UK and EU reached a preliminary agreement on Brexit withdrawal terms. Its ratification would support business confidence and investment, although there are serious doubts over whether the UK parliament will give the green light to the deal as it currently stands.

United Kingdom Economic Growth

Growth should be fueled next year by the looser fiscal stance and higher wages boosting private consumption. However, private fixed investment will likely remain subdued until there is greater clarity on the Brexit front. A failure to seal a withdrawal deal with the EU before the UK departs the bloc in March 2019 is the key downside risk. Our panelists expect GDP growth of 1.5% in 2019, up 0.1 percentage point from last month’s forecast, and 1.5% again in 2020.

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United Kingdom Facts

Bond Yield1.20-3.04 %Dec 11
Exchange Rate1.25-0.35 %Dec 11
Stock Market6,807-0.26 %Dec 11

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