2 minute read 28 May 2019
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How worried should the UK be?

By

Omar Ali

EY UK Financial Services Managing Partner

UK financial services leader. Passionate about making UKFS a great place to work where people can reach their potential. Champion for D&I. Football enthusiast. Bad at skiing.

2 minute read 28 May 2019

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The EY ITEM Club Outlook for financial services suggests a subdued growth for the UK economy in the coming years.

The latest Outlook was based on the scenario that an agreement over the UK’s withdrawal from the EU would be reached by the proposed deadline of 31 October 2019.

The forecast shows a familiar, subdued outlook for the UK economy where GDP growth is predicted at only 1.3% for this year, with a marginal increase at 1.5% in 2020.

The continued political uncertainty surrounding Brexit and increasing international trade protectionism have impacted both consumer and business appetite to borrow and spend. Business investment fell 0.4% in 2018 – only the second annual decline since 2009 - and was forecasted to see another decline in 2019. Even if the investment projects that are currently on hold are implemented once a deal on the withdrawal agreement is reached, we’re unlikely to see the results of these investments until 2020. As a result, business lending is forecast to rise only 1.3% this year, and 2.2% in 2020.

Despite improvement in real incomes, the growth in demand for consumer credit is set to slow from 4% in 2018 to 1.6% this year, and to 2% in 2020 – the lowest rate since 2013. With the household saving ratio sitting well below the long-run average and continued Brexit-related uncertainty, consumers are likely to want to bolster their finances rather than increase their spending. Mortgage lending is predicted to grow just under 1% this year – the lowest since 2011 - followed by 1.3% in 2020, as house prices remain high and unaffordable to many potential buyers.

Continued political uncertainty surrounding Brexit and increasing international trade protectionism have impacted both consumer and business appetite to borrow and spend.

However, Brexit and global geopolitical uncertainty are not the only issues to contend with. Even if the economic landscape improves, there are other long-term trends that the industry must respond to.

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GDP

1.3%

Percentage GDP is predicted to grow in 2019

Summary

With continued uncertainty over Brexit and increasing trade protectionism worldwide, the UK economy is predicted to register subdued growth figures in the coming years. There is also the pressure of declining consumer credit and household saving ratio, as well as lower corporate borrowing and spending capacities, which have cumulatively led to long-term economic trends that need immediate countermeasures.  

About this article

By

Omar Ali

EY UK Financial Services Managing Partner

UK financial services leader. Passionate about making UKFS a great place to work where people can reach their potential. Champion for D&I. Football enthusiast. Bad at skiing.