BloombergLONDON (Bloomberg) — The weaker pound is failing to boost British growth, according to the British Chambers of Commerce.
The business group downgraded its medium-term outlook for the economy in a report on Friday, citing a weaker-than-expected contribution from trade and subdued consumer spending.
Inflation will outpace wage growth until 2019, the BCC forecast, continuing the squeeze on shoppers’ pockets that weighed on performance in the first half of 2017.
While sterling’s plunge following Britain’s vote to leave the European Union last year helped cushion some of the initial impact of the decision, there is scant evidence it is leading to a sustained re-balancing of the economy.
At the same time, the decline is pushing up prices for consumers, reducing their spending and threatening one of the key drivers of expansion.
“It is increasingly clear that the post-EU referendum slide in the value of sterling has done more harm than good,” said Suren Thiru, head of economics at the BCC. “The contribution of net trade to British GDP growth is not expected to be as strong as we previously predicted, as we see little evidence that the depreciation of the pound is materially boosting Britain’s external position.”
The BCC’s downgrade to its net trade contribution estimate is mainly based on a rising forecast for import growth, with few signs customers are switching away from goods brought in from overseas despite their rising costs.
That chimes with the current picture in Britain, where net trade made no contribution to growth in the second quarter.