Uncertainty around Brexit hits UK's growth predictions

Uncertainty around Brexit hits UK's growth predictions

The Confederation of British Industry has cut its growth forecasts for the British economy, warning that uncertainty ahead of the EU referendum is beginning to weigh on investment.

The business group's latest quarterly forecast predicts that the UK will see 2% GDP growth in both 2016 and 2017, down from its previous estimate of 2.3% and 2.1% respectively.

The CBI said growth is expected to be driven by household spending and investment, but the deterioration in the Brexit vote and the global economic outlook represent "major challenges".

It said that Brexit uncertainty is now having a "tangible impact" on the spending plans of some firms.

The warning comes after Bank of England governor Mark Carney revealed a Brexit vote could trigger a possible "technical recession" and see the pound plunge in value.

The Bank also slashed its growth outlook for the next three years.

CBI director general Carolyn Fairbairn said: "A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms' plans to invest.

"At present, the economic signals are mixed - we are in an unusually uncertain period."

The CBI believes that the timing of a first rise in interest rates - which have been held at 0.5% since 2009 - will now be in the second quarter of 2017, rising to 0.75%.

Rain Newton-Smith, CBI economics director, added: "Referendum uncertainty also appears to be dampening some activity in the near-term, and so put altogether, we do not now expect to see a rise in interest rates before 2017."

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