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UK Business Forecast for 2018

The dust and glitter of the festive season has now settled and we’re already well into the first month of 2018 so today we’re going to take a look at what business owners here in the UK can expect in the coming year.  

Slow consumer spending growth has dragged down the UK’s GDP growth over the last two year and this growth is predicted to slow from 1.5% in 2017 to 1.4% in 2018.  Despite a rise in exports and public investment, Brexit is having a negative effect and the Prime Minister’s defeat in the House of Commons by Conservative rebels on the crucial vote backing an amendment to her flagship European Union withdrawal bill.

Beyond Brexit, the key challenge facing the government is to boost UK productivity growth which will require an increase in both public and private investment in housing, transport infrastructure, skills and innovation with measures necessary to support growth across all regions of the country.

With some sectors reliant on EU27 workers (such as warehousing and construction; hotels and restaurants; and food manufacturing), migration will be an important issue in the post-Brexit policy.  Future net migration from the EU27 could reduce UK GDP in the future but should not bring a negative impact on the average UK income levels.

The Resolution Foundation (an independent think tank launched in 2005 aimed at improving the standard of living in the UK) is expecting zero growth in real wages over the course of the coming year as wage growth rises in line with inflation.  This is an improvement over 2017 when pay growth was overtaken by rampant inflation caused by the fall in Sterling following the Brexit vote.

Leaders in the UK tourist industry are predicting a bright and sunny 2018 following last year’s success.  With 2017 being looked back on as a record year for tourist numbers visiting the UK, overseas visits to Britain are expected to break through the 40 million barrier for the first time.  Spending by overseas tourists is expected to reach more than £26 billion (compared with £25.1 billion in 2017) making tourism one of our most valuable export industries.

The OECD (the Organisation for Economic Co-operation and Development which is based in Paris) warns that the UK economy will slow rapidly in 2018 as we head towards a hard Brexit.  This is based on the assumption that the UK will leave the EU in March 2019 without a free trade deal with the r3est of Europe which will undermine both business and consumer confidence over the next twelve months.  With Prime Minister Theresa May hoping to secure a transition deal, some Conservative MPs believe that her efforts will fail, meaning that the UK would then have to trade with the rest of Europe on the basic World Trade Organisation (WTO) rules, including the imposition of tariffs and lengthy and intrusive customs checks.

In response to the OECD forecasts, a spokesperson for the Treasury claims that our economy has grown continuously for four years and there is a record number of people in work.  However, we’re warned not to be complacent and that the focus on restoring productivity growth must continue as it is the only way to deliver higher wages and higher living standards for people across the UK.