London – 29 March 2018
Commenting on the anniversary of the UK’s invocation of Article 50, Ana Boata, European Economist at Euler Hermes, said:
"The UK economy has been resilient since the pro-Brexit vote. GDP growth only slowed to 1.7% in 2017 from 1.9% the previous year. However, even with the two-year transition period, we expect GDP growth to remain below potential at 1.5% this year and down to 1.2% in 2019, which would be the lowest level recorded since 2009. Lower foreign direct investment remains a drag on medium term growth prospects."
"Strong export performance has papered over some of the cracks that are appearing in the economy as the exit date looms. Not least, there has been a dramatic fall in consumer spending, which is almost two thirds lower than in 2016. People are tapping into their savings and are suffering from sluggish wage growth and high inflation. Thus, for businesses, lower margins and decelerating demand has led to increasing failures, notably in the retail sector. Overall business insolvencies increased by 5% in 2017."
"Long term UK growth will feel the pinch of the exit from the Single Market. We expect a limited Free Trade Agreement on goods and services to be effective in 2021 at the earliest, after the transition period. In such a case, looking at existing FTAs with Europe, average tariffs on goods are set to reach 2-3%, while services will suffer an additional 10% cost on average."
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