Britain’s biggest business lobby cut its growth forecasts for the U.K. economy and said the referendum on European Union membership has put a “dark cloud of uncertainty” over the outlook.
The warning on Monday from the Confederation of British Industry follows an intense week of back and forth between both sides of the debate before the June 23 vote, with International Monetary Fund Managing Director Christine Lagarde and Bank of England Governor Mark Carney saying that leaving the EU could trigger a recession.
Those interventions prompted accusations of scaremongering from Brexit campaigners including former Chancellor of the Exchequer Norman Lamont. Also on Monday, the Telegraph newspaper published a letter signed by 300 business people saying that the U.K. would be better off outside the EU.
Britain’s competitiveness is being “undermined by our membership of a failing EU” and “Brussels red tape stifles” millions of companies. they said. The issue of EU membership and the potential implications of quitting the bloc are dominating the political and economic landscape in the U.K. Global prospects are also less assured than at the start of the year and the IMF has warned that the world economy is at risk of slipping into stagnation.
The CBI now sees U.K. gross domestic product rising 2 percent this year and next, down from 2.3 percent and 2.1 percent, it said in London on Monday. That’s in line with the BOE, which lowered its projections on Thursday.
“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,” said CBI Director General Carolyn Fairbairn. “We expect the U.K.’s growth path to continue but it is likely to be at a slower rate than previously thought.”
Growth slowed to 0.4 percent in the first quarter and surveys point to a continued loss of momentum. Data this week will provide new insights into the economy, starting with a report on Tuesday that’s forecast to show inflation held at 0.5 percent in April, far below the BOE’s 2 percent
Basic-wage growth probably accelerated to 2.3 percent in the first quarter from 2.2 percent in the three months through February and retail sales probably rose for the first time in three months in April, economists forecast before separate reports on Wednesday and Thursday. The CBI will release its monthly factory-orders report on Friday.
In a separate report on Monday, the Chartered Institute of Personnel and Development said earnings are set to remain in the “slow lane” through the end of the decade. A survey of 1,000 employers showed that companies expect median pay increases of about 1.7 percent in the year to March 2017. The weak pace is partly due to low inflation.
“The U.K. is now in its eighth year of productivity ‘go-slow,’ which continues to limit the scope for employers to pay more,” said CIPD economist Mark Beatson. “Recruitment and retention problems have so far proved manageable without across-the-board pay rises. This survey provides no indication of this situation changing any time soon.”