17.06.201900:17:00UTC+00BCC Trims UK Growth Outlook

The British Chambers of Commerce downgraded its growth outlook for next year as unwinding of historically-high inventory levels amid weak business investment weigh on economic activity.

In the latest economic forecast, released Monday, the growth projection for 2020 was lowered to 1 percent from 1.3 percent and that for 2021 to 1.2 percent from 1.4 percent.

However, the growth outlook for 2019 was lifted marginally to 1.3 percent from 1.2 percent, citing the exceptionally rapid stock-building ahead of the original Brexit deadline in March.

Gross domestic product was forecast to remain flat in the second quarter of 2019 after expanding 0.5 percent in the first quarter.

Over the near-term, the lobby expect that the ongoing Brexit impasse, together with the high upfront cost of doing business in the UK and the running down of excess stock to suffocate investment activity.

Business investment was expected to decline 1.3 percent this year versus prior forecast of 1 percent drop. Further, the lobby projected 0.4 percent growth next year, before improving to 1.1 percent in 2021.

Further, trade was set to make a negative contribution as exchange rate volatility, Brexit uncertainty and a subdued global economy, weaken trading conditions for British exporters.

Export growth was seen at 1.6 percent this year and next and 1.7 percent in 2021, compared to import growth of 4.3 percent in 2019, 1.8 percent in 2020 and 2.2 percent in 2021.

Nonetheless, consumer spending was forecast to remain resilient on low unemployment and earnings growth to stay above inflation. Household consumption growth outlook was lifted to 1.4 percent for 2019 and to 1.4 percent in 2020.

The forecast was based on the assumption that the UK avoids a messy and disorderly Brexit.

"Businesses are putting resources into contingency plans, such as stockpiling, rather than investing in ventures that would positively contribute to long-term economic growth," Adam Marshall, Director General of the BCC, said. "This is simply not sustainable."

Business communities expect the next Prime Minister to quickly find a sensible and pragmatic way forward to avoid a messy and disorderly Brexit, Marshall added.