The UK economy has demonstrated remarkable resilience following the shock of June’s vote to leave the European Union. Riding a wave of robust consumer spending, GDP rose by 1% in the second half of the year. As a result, our outlook for 2017 has brightened.
Banking and Capital Markets viewpoint:
• UK bank assets grew by 11% in 2016, the fastest rise since 2008. They will grow by a slower 1.5% this year, and shrink next year, before modest growth returns in 2019.
• Growth in mortgage lending is set to slow to 1.4% this year, and just 0.1% in 2018, compared to 4.4% in 2016.
• The stock of business loans will reach £414b in 2017, as growth slows to less than 2%, before stagnating in 2018.
• Growth in consumer credit will slow, but still increase by 4% in 2017
There are more challenges ahead, and Brexit-related headwinds will slow growth. A devalued pound will raise import costs, and subsequent inflation will cut into household spending power. This will hamper business investment and job creation as consumer spending slows. However, a weaker pound will also buoy the sterling revenues of companies with large overseas operations and over time, should support exports.
In this video, EY ITEM Club Chief Economic Adviser, Peter Spencer discusses the highlights of the EY ITEM Club Spring forecast launched on 10 April 2017.
Contact us to find out how EY Ireland can help you prepare for Brexit. For more content from the EY Ireland team, visit our YouTube channel.
