IMF cuts UK growth forecast as financial sector to face "major challenges"

The IMF now predicts growth of 1.6% for 2017, down from its previous forecast of 1.7%, and 1.5% in 2018.

Its data shows that since the start of this year, "growth has slowed notably", largely due to the Referendum, with growth down from 1.8% in 2016 and 2.3% in 2015.

IMF Managing Director Christine Lagarde said growth is projected to remain around 1.5% next year "as uncertainty about the shape of Brexit persists and inflation remains above target".

Helal Miah, investment research analyst at The Share Centre, commented: “After the much derided growth projections following the EU referendum, the International Monetary Fund and Christine Lagarde must to a certain extent feel vindicated in the UK’s actual growth rate 18 months on. It should therefore come as no great surprise that the IMF has further reduced its growth projections for the UK from 1.6% to 1.5% for this year.

“While this rate is far from the disaster scenario that ‘Remainers’ envisioned, it certainly hasn’t proven to be as rosy as ‘Brexiteers’ had us believe. Indeed if it wasn’t for the pickup in global activity, especially within the Eurozone with whom the UK is most reliant upon for trade, then I’m fairly sure that actual growth rates would have been far closer to the initial projections of the IMF.

“Immediately after Brexit, consumer confidence remained surprisingly upbeat, but it seems that was on the back of spending being put on low interest credit. However, as wage growth has slipped further behind the Brexit induced inflation spike, it is clearly evident that consumers are feeling the pinch. Retail sales have slowed dramatically and the fact that many retailers have been issuing profit warnings is evidence of the accelerated demise of the sector. Of course, it also has to face today’s structural challenge of online shopping in the background.

“The IMF and Lagarde are pointing towards the uncertainty of Brexit and the impact this is having on business confidence that are holding back on investments. Some may make the argument that there has been a positive impact for manufacturers as a result of the fall in sterling. This is all well and good and we hope that that more benefits could emerge of time, but it’s clear the overall impact has been negative and could have been worse were it not for the pickup in activity amongst our trading partners."