Britain’s economic growth is set to trail other EU countries in the next three years as the eurozone forges ahead at its fastest rate in 10 years, according to European Commission forecasts.
UK GDP growth for 2017 was downgraded to 1.5% - from 1.8% in the previous forecast in the spring - with the prediction for 2018 unchanged at 1.3% and a gloomier 1.1% for 2019, when Britain is due to leave the EU.
The commission gave an upbeat assessment of prospects in the eurozone area, with growth for 2017 marked up “substantially” to 2.2%, compared with 1.7% in the spring.
Eurozone growth is then expected to slow to 2.1% in 2018 and 1.9% in 2019.
The EU economy as a whole was forecast to beat expectations with “robust” growth of 2.3% this year, up from 1.9% in the spring forecast, followed by 2.1% in 2018 and 1.9% in 2019.
Only Italy’s economy was in a similarly sluggish state to Britain’s, with a forecast of 1.5% GDP growth this year, 1.3% in 2018 and 1% in 2019.
The Autumn 2017 Economic Forecast put the UK’s slow growth down to inflation caused by the collapse in the pound following the Brexit vote, which had constrained private spending.
It also noted that “uncertainty continues to weigh on business investment” and the UK’s GDP performance was due to “remain subdued over the forecast horizon”.
Investment growth was forecast to weaken in 2018 as uncertainty prompts companies to defer spending. UK unemployment is projected to rise from 4.5% to 4.8% by 2019, while inflation eases from a peak of 2.7% to 2.1% in two years. Having fallen from 4% to 2.3% of GDP in 2016/17, the Government’s deficit is expected to rise to 2.5% by 2018.
It stressed that its analysis of the UK’s prospects was based on a “purely technical assumption of status quo” in terms of the UK’s relations with the EU, and did not take into account any possible outcome from negotiations on a future trade deal.
“After five years of moderate recovery, European growth has now accelerated,” said European economic commissioner Moscovici.
“We had several major elections; they are now behind us and political uncertainty has continued to decrease from the high levels experienced a year ago.”