Economy

Brexit cuts United Kingdom household incomes by 600 pounds, Niesr says

The National Institute of Economic and Social Research (NIESR) has said it is "almost certain" that the slowing in the United Kingdom economy and the accompanying fall in living standards over the past year are a outcome of the Brexit vote.

NIESR published a report on Wednesday claiming that the UK's vote to leave the European Union has damaged living standards in the country and cost the average British household over £600 per year.

Niesr now expects the United Kingdom economy to grow by 1.6 per cent this year and 1.7 per cent next year, down from its August projection of 1.7 per cent in 2017 and of 1.9 per cent in 2018.

"Death of project fear: Red-faced experts admit they were "too pessimistic" about Brexit" was the headline in the Daily Express reporting the previous Niesr estimates.

Looking ahead to the Autumn Budget, Young said it was possible to "relax fiscal austerity a little while maintaining long-term fiscal discipline" as a means to tackle the poor productivity growth forecast by NIESR.

It predicted the United Kingdom gross domestic product to expand by 1.6% this year and 1.7% in 2018, a modest downward revision on the forecasts it made earlier this year.

The forecast does not, however, suggest a crisis for the United Kingdom economy next year and indicates only a mild slowing of growth over the medium term as a result of Brexit.

Niesr, by contrast, is working on the assumption of a "smooth withdrawal from the EU".

The think tank also said the vote had hit the potential growth of the economy, as well as expectations for growth in the United Kingdom over the next three years.

The think tank did, however, strike a cautious tone, stating: "Although economic growth is likely to be a touch stronger in the second half of this year compared with the first, it is important to note that activity has slowed since last year".

The Treasury's official forecaster, the Office for Budget Responsibility, has warned that it is likely to revise down its own United Kingdom productivity forecasts at the 22 November Budget, which will likely damage both the overall growth forecast and the outlook for the public finances. While growth in new orders has held up and headcount has risen strongly, output growth has lost some steam over the last quarter.

In the wake of rising inflation and a weak pound, the Bank of England (BoE) is expected to raise interest rates for the first time in a decade on Thursday.

NIESR also expects the Bank of England to continue raising interest rates every six months until it reaches 2% in the middle of 2021.



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