According to the forecast of the Bank of England, the UK GDP growth rate by the end of the year will amount to only 1%. According to the National Bureau of Statistics of the country, after falling by 0.2% in the II quarter of 2019, GDP grew by 0.3% in the III quarter. Compared to the corresponding quarter of 2018, GDP grew by 1%, which is the lowest growth rate since the 1st quarter of 2010.
The drivers of economic growth in the III quarter of 2019 were the services and construction sectors. A positive effect on GDP growth was exerted by an increase in government and population spending. At the same time, stagnation has begun in industry and the mining sector. During this period, the volume of investment also did not increase.
It is noteworthy that back in 2015, the UK GDP growth exceeded 2%. After the majority of the British residents voted to leave the EU, a political crisis erupted in the country: two governments have not been able to hold Brexit and resigned.
Politicians failed to work out a plan for a "divorce" from the EU, as a result, exit from the European Union was repeatedly postponed. In October, parliament banned Prime Minister Boris Johnson from conducting a Brexit without additional agreements with the EU.
Against this background, in the last quarter of 2019, the Confederation of British Industry business optimism indicator for the UK fell from -32 to -44 points.
It is curious that the Bank of England expects recovery growth, which could reach 1.6%, already in 2020. According to Bank experts, the adoption of an agreement to exit the EU and the completion of Brexit will “accelerate” the economy and stimulate the flow of investment.
It is worth noting that in its forecasts, the Bank of England relies on a scenario according to which brexit will occur in late 2019 - early 2020 and agreements on a free trade area will be reached between the UK and the EU. A similar agreement, as noted by economists of the British Central Bank, has already been ratified by the European Union and Canada. The Comprehensive Economic and Trade Agreement (CETA) implies the mutual abolition of almost all customs tariffs, the destruction of administrative barriers between countries and cooperation in the field of intellectual property protection.
In a conversation with RT, the head of BCS Broker investment department Narek Avakyan emphasized that too many risks remain for the British economy next year.
“The slowdown in economic growth is mainly due to the departure of a number of large companies from Britain’s investment business. In other words, the economic slowdown is not caused by social factors. However, I would not expect that in 2020 the country's economy will again grow at a rate above 2% per year. There will be too many risks after brexitis, and so far too much uncertainty. It is not clear how the new government will pursue economic policy, especially in the sphere of foreign economic activity. Now there is free trade with the EU and the rules of the game are clear to everyone. What these rules will be after leaving the EU is an open question, ”Avakyan believes.
According to the expert, in the case of severe brexitis, the British economy will face a painful process of transformation into a more isolated one in the next few years, and in this case, the departure of some large European financial institutions from London cannot be ruled out.
Now the European Union is the UK's most important trading partner: foreign trade turnover is £ 648 billion (almost $ 770 billion). The EU accounts for 45% of British exports and 53% of imports. An important article of British export to Europe is the provision of services in the analytical, legal, technical and other fields.
However, while experts are talking about only one stable factor in the theoretical future growth of the UK economy. We are talking about low unemployment, which now stands at 3.9%. Keeping the indicator at this level and continuing growth in salaries may stimulate an increase in consumer activity.
“As a result of Brexit, the country's financial sector will suffer - the national currency may weaken. A decrease in trade between the EU and the UK (expected after Brexit) will lead to a reduction in financial transactions. The British economy, according to various estimates, may lose up to £ 252 billion over 15 years, ”concluded Artyom Deev, head of the AMarkets research department, in a conversation with RT.