British industrial bodies downgrade growth forecasts
Little improvement seen in 2020, even with a Brexit deal
London — Brexit pressure and political uncertainty have prompted the Confederation of British Industry (CBI) and manufacturing trade body Make UK to downgrade their growth forecasts for 2020.
Official figures have shown that Britain’s economy is growing at its weakest annual pace since 2010. Industry leaders see little or no improvement in 2020, even if Prime Minister Boris Johnson wins re-election and secures a Brexit divorce deal by a January 31 deadline.
The CBI on Monday predicted economic growth of 1.3% in 2019 and 1.2% in 2020, followed by a rise to 1.8% in 2021, assuming Johnson reaches a trade deal with the EU that leads to no tariffs and little divergence from EU rules.
“Alongside perennial Brexit uncertainty, (businesses) are also contending with softer global demand,” said CBI chief economist Rain Newton-Smith.
Back in July, the CBI forecast growth of 1.4% for 2019 and 1.5% for 2020.
Make UK halved its forecast for manufacturing growth in 2020 to 0.3% from 0.6%, though it kept its forecast for growth in the overall economy in 2020 unchanged at 1.4%, up from 1.3% in 2019.
“Export orders have increased slightly this quarter, indicating greater confidence from foreign customers about purchasing UK goods as concerns about an end-of-year no-deal Brexit fade,” said Make UK CEO Stephen Phipson.
Britain’s economy has slowed since the June 2016 referendum vote to leave the EU, with manufacturing hit especially hard due to concern about disruption of supply chains on top of pressure from the US-China trade war.
Johnson’s Brexit plan, which he could not get parliament to pass before he called an early election on December 12, means Britain will leave the EU on January 31 and negotiate a new trade deal to take effect at the end of 2020.
Johnson has said he will not allow transitional arrangements to continue beyond the end of 2020, but many trade experts say this leaves too little time to negotiate a good deal.
If a post-EU transition deal expires at the end of 2020 without an agreement settled for future trade ties, the CBI predicted a sharp slowdown in growth in 2021 to just 0.4%, the weakest since the global financial crisis.
“A no-deal Brexit would put the brakes on UK growth and realise businesses’ worst fears,” said Newton-Smith.
British manufacturers cut jobs in November at the fastest rate since 2012, a separate survey showed on Monday.
An IHS Markit/CIPS manufacturing Purchasing Managers’ Index (PMI) sank to 48.9 in November from 49.6 in October, a slightly smaller decline than an initial estimate of 48.3.
The PMI’s employment component sank to 46.8 from 47.1, representing the biggest loss of jobs since 2012.
Although the unemployment rate is its lowest since 1975, official figures have shown that British employers in the third quarter cut jobs by the most for any quarter in the past four years. Monday’s data suggest this risks continuing.
Manufacturing makes up about 10% of Britain’s economy.