A major international organisation has downgraded its forecasts for UK economic growth over the next two years, amid warnings of the uncertainty created by the possibility of a no-deal Brexit.
The Organisation for Economic Co-operation and Development (OECD) cut its prediction for UK GDP growth in 2018 from 1.4% in May to 1.3% now, and for 2019 from 1.3% to 1.2%.
And the body’s chief economist said it was “vital” for a Brexit deal to be struck which maintains the closest possible links between the UK and the European Union.
The forecasts in the OECD’s Interim Economic Outlook see Britain lagging significantly behind the eurozone, with single currency area GDP slated to grow by 2% this year and 1.9% in 2019.
But the report warns of a global slowdown amid uncertainties over political instability and protectionist trade policies.
Already, tit-for-tat tariffs imposed by Donald Trump’s USA and China have contributed to global trade slowing “markedly” in recent months, with US imports of steel from China and Chinese imports of American cars “sharply” down.
OECD chief economist Laurence Boone said the prices of washing machines for US consumers jumped by 20% following the imposition of trade barriers, warning: “Down the line, higher tariffs mean higher prices for consumers, less investment and less jobs for workers, and ultimately losses in productivity and standards of living.”
Forecasts for global GDP growth were downgraded from 3.9% to 3.7%, as the report warned that “confidence has weakened, trade and investment growth have proven slower than anticipated and wage growth has remained modest across most countries”.
On Brexit, Mr Boone said: “In Europe, political risks could harm growth and social cohesion.
“Brexit is an obvious source of uncertainty. It is vital that a deal is struck that maintains the closest possible relationship between the United Kingdom and the European Union.”