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Brexit latest: OECD halves UK growth forecast due to EU referendum vote Brexit latest: OECD halves UK growth forecast due to EU referendum vote
(35 minutes later)
The OECD has slashed its 2017 growth forecast for the UK in half as a result of the Brexit vote. The OECD has slashed its 2017 growth forecast for the UK in half as a result of the Brexit vote and warned of "very high" uncertainty ahead.
The multilateral economic institution had projected UK GDP growth next year of 2 per cent in June, but today reduced that to just 1 per cent in its latest Economic Outlook. The multilateral economics institution had projected UK GDP growth next year of 2 per cent in June, but today reduced that to just 1 per cent in its latest Economic Outlook.
That was easily the largest downgrade for any major advanced economy.That was easily the largest downgrade for any major advanced economy.
The OECD acknowledged that financial markets had stabilised since the immediate volatility in the wake of the June 23 vote and that swift action the Bank of England had helped.The OECD acknowledged that financial markets had stabilised since the immediate volatility in the wake of the June 23 vote and that swift action the Bank of England had helped.
But the Paris-based institution said it still saw major risks ahead. But the Paris-based institution, which is funded by member countries, said it still saw major risks ahead.
“Uncertainty about the future path of policy and the reaction of the economy remains very high and risks remain to the downside” it said.“Uncertainty about the future path of policy and the reaction of the economy remains very high and risks remain to the downside” it said.
The UK’s 2016 forecast was also shaved down from 1.9 per cent to 1.8 per cent.The UK’s 2016 forecast was also shaved down from 1.9 per cent to 1.8 per cent.
In response to the latest forecast the Chancellor, Phillip Hammond, said:In response to the latest forecast the Chancellor, Phillip Hammond, said:
"The OECD highlights uncertainty in their outlook, and while I recognise that there may be some difficult times ahead, I am confident that we have the tools necessary to support the economy as we adjust to a new relationship with the EU and take advantage of the opportunities that it offers.""The OECD highlights uncertainty in their outlook, and while I recognise that there may be some difficult times ahead, I am confident that we have the tools necessary to support the economy as we adjust to a new relationship with the EU and take advantage of the opportunities that it offers."
The OECD forecast for the UK is much less dire than what its chief economist, Catherine Mann, presented in June. However, the OECD forecast for the UK is much less dire than what its chief economist, Catherine Mann, presented in June.
She said then that the possible economic impact of Britain voting to leave the EU would be “in the same ball park” as a hard landing for the Chinese economy, the second largest in the world.She said then that the possible economic impact of Britain voting to leave the EU would be “in the same ball park” as a hard landing for the Chinese economy, the second largest in the world.
In July the OECD said that the shock and disruption delivered by the Brexit vote was on a par with that of an unforeseen national disaster.In July the OECD said that the shock and disruption delivered by the Brexit vote was on a par with that of an unforeseen national disaster.
Many City of London forecasters have been revising away their initial forecasts of a recession this year in light of better than expected economic data in the wake of the vote - although like the OECD they generally still expect a sharp slowdown next year.Many City of London forecasters have been revising away their initial forecasts of a recession this year in light of better than expected economic data in the wake of the vote - although like the OECD they generally still expect a sharp slowdown next year.
“As the available information grows, the referendum result appears, so far, not to have had a major effect on the UK economy. So it hasn’t fallen at the first fence but longer-term effects remain to be seen" said the chief economist of the Office for National Statistics Joe Grice today.“As the available information grows, the referendum result appears, so far, not to have had a major effect on the UK economy. So it hasn’t fallen at the first fence but longer-term effects remain to be seen" said the chief economist of the Office for National Statistics Joe Grice today.
Forward indicators show a mixed picture. Various forward economic indicators present a cloudy picture.
A report from Markit separately showed that British households' expectations about their personal finances held steady in September in another indication that consumers are so far riding out the referendum result. A report from Markit separately released today showed that British households' expectations about their personal finances held steady in September in another indication that consumers are so far riding out the referendum result.
Markit's Household Finance Index was 44.8 this month, largely flat on the 44.9 in August and maintaining the recovery from July in the immediate aftermath of the referendum when it dipped sharply to 42.Markit's Household Finance Index was 44.8 this month, largely flat on the 44.9 in August and maintaining the recovery from July in the immediate aftermath of the referendum when it dipped sharply to 42.
However, the latest survey from the Bank of England regional agents, also released today, showed the confidence of businesses has been slipping in the third quarter of the year, pointing to stagnant investment spending and hiring over the next 12 months.However, the latest survey from the Bank of England regional agents, also released today, showed the confidence of businesses has been slipping in the third quarter of the year, pointing to stagnant investment spending and hiring over the next 12 months.
"The annual rate of activity growth has slowed overall as uncertainty had risen following the EU referendum, although it remained positive" the Bank said."The annual rate of activity growth has slowed overall as uncertainty had risen following the EU referendum, although it remained positive" the Bank said.