THE Bank of England has sensationally warned the UK economy is not prepared for a no-deal Brexit after growth was downgraded to its lowest level since the financial crash.
The BoE slashed this year’s growth forecast to 1.2 percent – the lowest since 2009, when the economy slumped 4.2 percent at the height of the recession. This shock downgrade compares with 1.7 percent predicted in November, while the Bank has also cut its outlook for 2020 to 1.5 percent. The gloomy outlook came as policymakers at the nine-strong Monetary Policy Committee voted unanimously to keep interest rates unchanged at 0.75 percent.
Though some analysts think the bank is erring on the side of caution given the uncertainties surrounding Brexit, the pound fell to a 3-week low below $1.29. Just moments after the latest rates decision, the Bank said: ‘Since the Committee’s previous meeting, key parts of the EU withdrawal process had remained unresolved and uncertainty had intensified.
‘Businesses had appeared increasingly to be responding to Brexit-related uncertainties and there were signs that those uncertainties might also be affecting household spending and saving decisions.’
The Bank said growth was likely to have halved to 0.3% in the fourth quarter of 2018, down from 0.6% in the previous three months and estimated it will fall again to 0.2% in the first quarter of 2019. This is being driven by sharp falls in business investment, as well as a drop in consumer spending and signs of a weaker UK housing market.
A sharper-than-expected slowdown in the global economy is also impacting UK growth, according to the Bank. But it said the growth hit was expected to be short-lived, with a recovery in expansion later in 2019 – though this is based on a Brexit deal being reached by March 29.
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