The Daily Update - Brexit / British Chamber of Commerce / UK Government

This morning the British Chamber of Commerce (BCC) urged the British government to speed up its decision making on large infrastructure projects to help cushion the impact caused by the Brexit vote after dramatically cutting its growth forecasts for the UK economy in the coming years. In the first update since the UK’s decision to leave the EU, the BCC cut its GDP growth forecasts from 2.2% to 1.8% for 2016 and by a massive 1.3% in 2017 from 2.3% to 1%. The 2018 forecast was also dropped from 2.4% to 1.8%. The BCC estimate these downward revisions will mean Britain’s economy will be nearly GBP44bn smaller than the BCC forecasts made before the vote.

Adam Marshall, the BCC acting director general said in a statement 'The government should start with the long list of business-boosting infrastructure projects that have been put on hold for far too long - including a firm decision on a new airport runway, new nuclear investment, and road and rail schemes'. However it is worth noting that as long ago as 2000 the Department for Transport said more airport capacity was needed to cope with expected doubling of passenger numbers, with a government white paper published on third runway at Heathrow in 2003, so breath holding is not advised!!

Suren Thiru, BCC's head of economics also gave a worrying assessment of the UK when he said 'Mounting uncertainty is likely to put a brake on investment, while rising inflation and moderately weaker labour market conditions are expected to stifle consumer spending' although he did add that 'On the upside, the UK’s net trade position is expected to be boosted by the post-referendum slide in the value of sterling.' However, whilst Thiru believes exporters are likely to get a boost from the weak pound he finished his statement saying 'While the longer-term outlook for the UK economy is highly uncertain the risks are on balance tilted to the downside, with the deep-rooted structural issues, such as the size of the UK’s current account deficit, leaving the UK increasingly exposed to economic shocks.'

Also over the weekend according to reports the UK Chancellor of the Exchequer Philip Hammond told a meeting of European Union finance ministers that the U.K. government won't lower its corporate tax rate below 17 percent. This move is in contrast to the previous Chancellor, George Osborne’s, who, in the days after the Brexit vote, said a corporate tax rate of 15% would help mitigate the impact of leaving the EU. As it stands at the moment the UK’s corporate tax rate is 20%, however this is due to fall to 19% next April and 17% by 2020. There had been rumours that the UK over recent months had been eyeing the Republic of Ireland’s corporation tax rate of 12.5% in the long term as a means of persuading companies to continue and stay and invest in the UK.