The UK is set to endure another recession at the turn of the year with growth forecasts cut from 2.6 and 2.4 per cent three months ago respectively, to 0.4 per cent and 1.4 per cent today.
“Severe confidence effects on spending and business” have been projected by the EY Item Club, with unemployment rising from 5 per cent currently to 7.1 per cent by the end of 2019.
This will have a knock-on impact on household real disposable income, which is forecast to fall by 0.5 per cent in 2017.
Peter Spencer, chief economist advisor to the EY Item Club said the economy is set to suffer a severe loss of momentum in the second half of the year.
“Heightened uncertainty is likely to hold back business investment, while consumer spending will be restrained by a weaker jobs market and higher inflation. Longer-term, the UK may have to adjust to a permanent reduction in the size of the economy, compared to the trend that seemed possible prior to the vote,” Spencer said.