219
United Kingdom The economic outlook is unusually uncertain given the risks around exit from the European Union. Assuming there is a smooth transition ending after 2021, activity is expected to grow at around 1% in the next two years. Brexit-related uncertainty will keep holding back investment until there is clarity about future trading arrangements. Weak global economic prospects will slow the recovery in exports. Inflation is projected to slow to below 2%. Monetary policy should continue to support activity and keep inflation close to target, but cannot fully address all shocks. The government should stand ready to intervene to address any Brexit-related disruption or a weakening of economic growth. The United Kingdom should strive to find an agreement that ensures the closest possible trading relationship with the European Union and high access for financial services to overseas markets. Economic uncertainty has held back investment Shifting expectations about the potential timing and nature of Brexit and a deteriorating international environment have weighed on trade and business investment. Persistent weakness in investment is starting to erode long-term prospects, and surveys point to weak investment intentions going forward. The accumulation of stocks in the first quarter of the year has been partially unwound, with little effect on growth as it essentially related to imported goods. Consumption growth has remained resilient, supported by continued growth in real household incomes. There are signs that the labour market is starting to cool. The unemployment rate has ticked upward and the number of vacancies has started falling. Net migration from the European Union has decelerated markedly since 2017 and has been only partly compensated for by more migrants from non-EU countries. Inflation has recently fallen below target.
United Kingdom 1 GDP growth will remain weak
Investment has been falling
Y-o-y % changes 4.0
% pts 4 United Kingdom
3
Euro area¹
3.2
United States
2.4
1.6
0.8
0.0
2015
2017
2019
Business investment →
2021
0
Y-o-y % changes 12 9
← Stockbuilding²
2
6
1
3
0
0
-1
-3
-2
-6
-3
-9
-4
2015
2016
2017
2018
-12 2019
1. Covers 17 countries that are both euro area and OECD members. 2. Contribution to changes in real GDP. Source: OECD Economic Outlook 106 database. StatLink 2 https://doi.org/10.1787/888934046019
OECD ECONOMIC OUTLOOK, VOLUME 2019 ISSUE 2: PRELIMINARY VERSION © OECD 2019