UK financial system set to lag friends once more as Brexit approaches, CBI says

LONDON (Reuters) – Britain’s financial system is on target to lag behind its worldwide friends once more this 12 months because it nears its departure from the European Union, based on new forecasts from the Confederation of British Industry, an employers’ group.

A conventional pink London bus crosses Waterloo Bridge, with the monetary district within the background, in London Britain, May 31, 2018. REUTERS/Henry Nicholls

The world’s fifth-largest financial system appears prone to develop by 1.four p.c in 2018, based on the CBI, weaker than projected development within the euro zone of two.2 p.c and within the United States of two.eight p.c.

Britain went from being the fastest-growing financial system within the Group of Seven to its slowest final 12 months as the worth of the pound fell after the Brexit vote in 2016 and corporations turned cautious about funding.

The CBI argued earlier than the Brexit referendum that staying within the EU can be finest for Britain’s financial system

The CBI’s forecast for Britain’s development price this 12 months represented a slight discount from its earlier forecast of 1.5 p.c, reflecting the financial system’s weak begin to the 12 months throughout unusually chilly climate, the group mentioned.

Growth appears set to sluggish to 1.three p.c in 2019, when it’s going to once more lag behind the euro zone and the United States, the CBI mentioned.

With lower than a 12 months to go earlier than Britain is because of go away the EU, the CBI described the dangers to the financial system as “skewed to the downside”, particularly if talks between London and Brussels on their new post-Brexit relationship flip bitter.

Uncertainty over Brexit continued to weigh on company funding, however the CBI mentioned a rising variety of its members deliberate to spend extra on automation, robotics and coaching to avoid talent shortages.

The CBI’s chief economist, Rain Newton-Smith, mentioned such applied sciences have been turning into way more inexpensive so a variety of companies have been beginning to undertake them.

“But at the same time there’s a huge amount of uncertainty in a lot of sectors about what our future relationship with the European Union will be,” she mentioned. “That means it’s just harder to make those very long-term, capital intensive decisions. Businesses are still holding back.”

Reporting by Andy Bruce; Writing by William Schomberg; Editing by Larry King

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