The British Chambers of Commerce (BCC) has warned of greater economic harm if the geo-political scenario does not quickly get a more stable footing.
As per the British Chambers of Commerce (BCC), companies across industry segments are looking to cut investment by nearly 10% in 2019 because of Brexit; this is despite Prime Minister Theresa May’s efforts to ease the country’s economic woes by getting a deal.
Weak investments by companies typically act as a drag on productivity which in turn act as brakes on wage rises and have an overall dampening effect on the economy.
“Political inaction has already had economic consequences, with many firms hitting the brakes on investment and recruitment decisions,” said Adam Marshall, BCC’s director general. “Worse still, some companies have moved investment and growth plans as part of their contingency preparations. Some of this investment may never come back to the UK.”
Already many financial companies have set up operations in other EU countries to continue servicicing existing clients and many carmakers have reduced their expansion plans in Britain.
Earlier this month, BMW disclosed, it could move out some production from Britain in case of a no-deal Brexit.
As per official figures, business investment have fallen in each of the four calendar quarters of 2018 – the longest such run since the global financial crisis.
According to finance minister Philip Hammond, there could be a pickup in investment by companies once a Brexit deal is done.
The BCC however presents a different picture. It opines, the diversion of resources to prepare for the risk of a no-deal Brexit coupled with high up-front costs of doing business in Britain, along with other questions including Britain’s future ties to the EU, essentially limits any quick investment rebound.
According to the BCC, business investment was expected to grow by 0.6% in 2020 and 1.1% in 2021.
It has lowered its overall growth forecast for the British economy to 1.2% in 2019, down from a previous estimate of 1.3%.
This would be the economy’s weakest growth in a decade, reflecting a slowdown in the global economy as well as Brexit.
The BCC saw only a weak pickup, with growth edging up to 1.3 and 1.4 percent in 2020 and 2021.
It said its forecasts assumed that Britain would avoid a disorderly exit from the EU.
“A messy and disorderly exit from the EU would do real and lasting damage to the UK’s economic prospects,” said Marshall.
Tomorrow, Prime Minister Theresa May is expected to ask lawmakers once again to back her Brexit plan this week after they rejected it twice previously.