Government too 'distracted' by Brexit to kick-start UK growth - business group

The Government has become "distracted" by Brexit and failed to stimulate economic growth in the UK, the head of the British Chamber of Commerce (BCC) has said.

The business group raised its GDP forecast for 2018 from 1.1% to 1.4%, and 1.3% to 1.5% for 2019, saying this was a result of stronger than expected consumer spending.

Its first forecast for 2020 predicts growth of 1.6%.

But despite the upgrades, UK growth is set to remain well below the historical average throughout the forecast period.

The latest forecast also implies the country will remain among the worst performing economies in the G7 until 2020 at the earliest.

Dr Adam Marshall, director general of the BCC, said: "Political uncertainty aside, the biggest brake on higher UK growth is a lack of concerted action to 'fix the fundamentals' here at home, with Government attention distracted by Brexit.

"The power to kick-start the UK economy, and raise the trend rate of growth above the current sluggish levels, lies in Westminster, not in Brussels - and businesses will respond to action by delivering investment, higher productivity, and the increased wages we all want to see."

The business group also said it expects public sector net borrowing over the next three years to be £13.4 billion higher than predicted by the Office for Budget Responsibility in last week's Spring Statement.

In 2017/18, the BCC predict that public sector net borrowing will total £49.7 billion, falling to £45.8 billion in 2018/19 and £34 billion in 2019/20.

Further positive change is expected in the growth of average earnings, which the BCC upgraded from 2.5% to 2.7% in 2018 and forecast rises of 2.9% in 2019 and 3.0% in 2020.

And inflation is expected to decrease, with 2.9% forecast for this year, 2.6% in 2019 and 2.2% in 2020.

The UK's export performance is expected to remain robust on the back of strong global growth, particularly in key markets such as the Eurozone and US.

Imports are also likely to continue to grow, meaning the contribution of net trade to UK GDP growth over the near term is to be limited.

Dr Marshall said: "While many individual businesses are doing well, the inescapable conclusion from our forecast is that the UK economy as a whole should be performing better than it is, given robust and sustained global growth.

"Although strong global conditions have given the UK a bit of a boost through higher export demand in recent months, we have serious concerns about the potential for further growth here at home when the performance of key trading partners slows.

"Sustained skills and labour shortages are also a real issue, with businesses reporting significant difficulties recruiting and retaining the people they need."

Suren Thiru, the BCC's head of economics, added: "Our forecast implicitly assumes a relatively smooth Brexit with a transitional arrangement where trading conditions will be largely unchanged.

"Failure to achieve such an outcome would likely weigh on UK economic activity over the near term."

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