"There are likely to be severe confidence effects on spending and business investment, resulting in anemic GDP growth for at least the next three years…The EY ITEM Club is forecasting GDP growth of 1.9% this year (down from the 2.3% it predicted in April) and expects growth of just 0.4% in 2017 (down from 2.6%) and 1.4% in 2018," the EY ITEM Club said in a press statement after the release of its summer forecast.
The uncertainty is holding back investment and is undermining consumer confidence, the ITEM Club said, noting that business investment is expected to fall 0.9 percent this year and 2 percent in 2017. Previously, Ernst & Young forecast investment rising to 3.2 percent and 7.8 percent respectively.
On the positive side, the UK pound's recent 10-percent fall against the dollar and euro is expected to drive exports, and the Monetary Policy Committee (MPC) is expected to reduce interest rates to zero, according to the report.
On June 23, the United Kingdom held a referendum to determine whether or not the country should leave the European Union. According to the final results, 51.9 percent of voters, or 17.4 million people, decided to support Brexit, while about 16.1 million opposed it.