The UK economy could be entering a period of stagflation – slow economic growth and high inflation – thanks to Brexit, says one of the region’s top IFAs.
The Bank of England is expected to increase interest rates again later this year and, according to Antony Barton, Senior IFA at Robertson Baxter, Britain should brace itself for a period of sluggish economic growth.
“The economic meltdown predicted after Brexit failed to appear, but the UK went from being the fastest growing economy in the G7 to the slowest. Since then business investment has fallen further, only beginning to recover in recent months,” he said.
“Growth in consumption, which was the fastest since 2005, was totally unsustainable and has impacted the economy across the board. As a result, the UK economy could become ”˜stagflationary’ and the UK could enter into a transitional period as we move closer to the exit from the EU,” added Antony.
“Economic growth in the UK is expected to be at around 1.4% with inflation averages forecast to remain around 2.6% for the duration of the year. The outlook for 2019 is increasingly uncertain as the departure from the European Union draws closer,” he added.
August will see the next Bank of England Inflation Report and that will provide an opportunity for the Bank to consider its policy stance. However, given the recent weakness in both UK and Overseas data, a rise in rates is likely to be postponed until later in the year.
“While we do not expect an increase in inflation rates in the Bank of England Inflation Report, which is due in August, we continue to forecast that the inflation rates will increase once more in 2018 – most likely in November,” said Antony.
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