The Bank of England’s reduction of its forecast for economic growth from 1.7 per cent 1.2 per cent this year would represent the lowest growth since the financial crisis, and poses a major risk to living standards, the Resolution Foundation said today (Thursday) in response to the latest Inflation Report.
The Foundation notes that if the Bank’s forecast proves accurate, it would represent the weakest growth since 2009, and amount to half the pre-crisis average rate of 2.7 per cent a year.
It adds that the Bank’s downgrade comes with further downgrades to the outlook for productivity. This year, productivity growth is now expected to be just 0.25 per cent, revised down from 1 per cent. This suggests further headwinds to incomes and living standards, and drives the Bank’s view that nominal pay growth will not accelerate much beyond its current rate of just over 3 per cent.
James Smith, Research Director at the Resolution Foundation, said:
“The Bank has today put a major health warning on the UK economy as ongoing Brexit uncertainty and weaker global growth combine. Such a slowdown, should it materialise, is not just about abstract GDP figures but slower earnings and income growth for households all over the country.
“Today’s report should remind politicians across parliament that the stalemated Brexit process comes with a very real price tag. Everyone should be focused on the action that sits within the hands of UK policy makers to deliver stronger growth than the frankly awful forecasts published today by the Bank.”