The UK economy has continued to grow over 2017 whilst employment rates have remained high and unemployment is at its lowest rate since the 1970s. In 2017, the ONS estimated the economy expanded by about 1.8% compared with the previous year, higher than the OBR’s Autumn forecast of 1.5%, but down from a rate of 1.9% in 2016, and the slowest pace of annual growth since 2012. The slowdown in UK GDP growth contrasts with a pick-up in other advanced economies. In the euro area, US, Canada and Japan, quarterly growth has been stronger than in the second half of 2016 and stronger than in the UK. Sterling’s fall has seen inaction pick up more rapidly in the UK than in the other major economies, contributing to weaker real growth.
The fall in the pound that followed the EU referendum has pushed up consumer price ination and squeezed households’ real incomes and spending whilst public spending cuts and political and Brexit-related uncertainties have also weighed on the economy. The OBR has now downgraded its growth forecasts for the medium-term, saying the UK economy would grow by just 1.4% in 2018, 1.3% in 2019 and 2020, and 1.5% in 2021. The growth urge is now in line with the Bank of England’s assessment.