BCC Say Britain Facing Prolonged Investment Slump

September 17, 2019
BCC Say Britain Facing Prolonged Investment Slump September 17, 2019 Riya Joshi

The world economic slowdown and the US-China trade war has resulted in rocky economic weather for the UK. It does not help that the UK is also facing the danger of Brexit amidst political tensions. The result is that the British Chambers of Commerce (BCC) predicts that the country might be set for a prolonged slump, the first in 17 years.

The BCC has already predicted weaker economic growth for the UK. Business spending will go down to 1.5 percent this year, with next year seeing it fall further to 0.1 percent. With the economic slowdown in full swing, many companies will curtail their investment plans and focus on just surviving. 

This slump will not be a short one. According to the BCC, this slump will last for three years. The last time the world economy saw this long a slump was when the dot com bubble burst. The 2008 financial crisis may have seen a greater drop in value but it only lasted for two years.

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The main reason for this decline in the UK economy is due to the uncertainty surrounding Brexit. Many firms are opting to prepare for a no-deal exit, which means a lot of preparations as the loss of the EU market will be devastating. All of the money currently being used for these preparations means none of it can be used for investment purposes and product development.

The Institute of Directors (IoD) says that both the EU and the UK need to plan for no-deal results. With a proper plan in place, businesses may be able to weather the storm. However, many at IoD think that Brexit will be disorderly and damage many of the industries involved. 

Based on an IoD poll where 950 business leaders voted, 51 percent of the think tank believes that a no-deal scenario would hurt the market while 32 percent believe that a continued delay would hurt worse. As it is, if no-deal happens, the IoD suggest that financial assistance should be extended to smaller firms.

Big Disruption Looms

Despite the economic risks of Brexit, the BCC thinks that the UK and EU will still be able to make deal. Even then, the disruption to the economy will negatively affect the country’s economy until 2021.

In a statement, Suren Thiru, the head of economics at the BCC, said

We’re seeing the economic costs of the ongoing Brexit stalemate alongside that backdrop of weaker global economic conditions. Businesses have had to switch plans and enact their no-deal planning – that’s going to have a hangover effect into next year/

About the Author

Riya Joshi

Riya Joshi Editor

Riya will providing you an insight in today's forex markets , which currencies are performing well and which ones look to be on the way down.

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