Ernst & Young’s latest Item Club survey forecasts that UK GDP growth will slow to 2.4% in 2015, down from the 3.1% expected this year.
Furthermore, the accountancy and advisory group predicts that business investment growth will fall to 5.8% next year, compared with an expected 9% in 2014.
The Item Club Autumn Forecast says that political uncertainty in the UK — resulting from next year’s General Election and the possibility of an EU referendum in 2017— is causing anxiety among UK businesses and is undermining the economic recovery. The political unrest in Ukraine and the situation in Syria and Iraq are also causing disquiet.
Ernst & Young’s Chris Voogd said: “Businesses are becoming nervous. They are faced with an uncertain domestic political situation, and there are renewed concerns about their key export markets. They haven’t ‘pulled on the reins’ just yet, but there is a definite sense of caution; this is a time for cool heads.”
Asked whether political anxiety is affecting UK businesses, the Chancellor of the Exchequer denied that the prospect of an EU referendum is damaging the economy. In fact, George Osborne said, it is the EU that is the problem.
Speaking at a UK Trade and Investment event in his Cheshire constituency of Tatton, Mr Osborne said: “Europe is not working for many businesses. I don’t think we can be immune to growing British frustration with our EU membership.
People increasingly come up to me and say: ‘What’s in it for us?’ If Europe wants to price itself out of the market, Britain doesn’t have to be a part of that.”
Mr Osborne went on to say that the Government is “fully committed” to helping manufacturers increase their exports, both in Europe and in new high-growth markets. “At a time when I have had to cut other budgets, UKTI’s has doubled, and this is because we want to see more businesses selling to the world.
"Unfortunately, compared to countries like Germany and the Netherlands, we are behinds in terms of our exporter numbers, particularly our SMEs. However, we have transformed UKTI over the last three years; it is now sharper, more focused and more commercial.”