Trade body predicts 'growth slowdown but not outright recession' for UK in 2017

The UK economy is expected to escape a post-referendum recession, according to the World Trade Organisation (WTO), but the group forecasts that world trade will expand at its slowest pace since the financial crisis.

The WTO said Britain's vote to leave the European Union will put the brakes on UK economic growth, but will not see it succumb to an "outright recession".

"The UK referendum result did not produce an immediately observable downturn in economic activity as measured by industrial production or employment; the main impact was a 13% drop in the exchange rate of the pound against the US dollar and an 11% decline in its value against the euro.

"Effects over the longer term remain to be seen. Economic forecasts for the UK in 2017 range from fairly optimistic to quite pessimistic. Our forecast assumes an intermediate case, with a growth slowdown next year but not an outright recession."

However, the WTO expects the skies to darken over the the global economy after gross domestic product (GDP) and trade growth expanded more slowly in China, Brazil and North America.

The trade body slashed its forecasts for world trade from 2.8% to 1.7% for this year, while growth for 2017 is slated to hit between 1.8% and 3.1% compared to a previous estimate of 3.6%.

It said global GDP growth looks set to reach 2.2% for 2016, marking the slowest pace of trade and output growth since 2009.

Roberto Azevedo, WTO director-general, said the trade growth slowdown should be seen as a "severe wake-up call".

"It is particularly concerning in the context of growing anti-globalisation sentiment.

"We need to make sure that this does not translate into misguided policies that could make the situation much worse, not only from the perspective of trade but also for job creation and economic growth and development which are so closely linked to an open trading system."

The WTO added that if its predictions hold, then 2016 will mark the first time in 15 years that the ratio between trade growth and world GDP has fallen below 1:1.