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Leading economists slashed their growth forecasts for Britain today to below that of the eurozone amid growing fears of a Brexit slowdown.
The International Monetary Fund cut its GDP growth prediction for the UK for this year from two per cent to 1.7 per cent, while projections for France, Germany, Italy, and Spain were upgraded to push up the overall eurozone figure by 0.2 to 1.9 per cent.
Former Cabinet minister Nicky Morgan, who now chairs the Commons Treasury select committee, said: “This just shows why our Brexit deal must put the economy and jobs front and centre. Britain’s households cannot afford for our economy to falter.”
Maurice Obstfeld, chief economist of the IMF, stressed the UK figure was based on economic growth so far in 2017, which was only 0.2 per cent in the first three months of the year.
He also warned that the Washington-based economic experts could take the axe to their forecasts for the British economy for future years if Brexit talks run into trouble.
“We stick to our forecasts that Brexit will be a negative to the British economy,” he told BBC radio. “Our forecasts
are right now that it’s a mild negative, because we have a favourably optimistic view of how the negotiations will go. But if the parties are not reasonable and collaborative, things could be worse.”
UK growth forecasts for next year remain unchanged at 1.5 per cent, the IMF said, below the 1.7 per cent for the euro area which has for years lagged behind Britain.
It updated its world economic outlook just days before official figures for GDP growth in the UK are published for the second quarter of this year.
Economists are not expecting any dramatic pick-up from the gloomy first quarter and the FTSE 100 fell by nearly one per cent this morning as investors digested the IMF findings.
The Treasury insisted the fundamentals of the UK economy are strong, with employment at a record high and the deficit down by three-quarters since 2009.
A spokesman said: “This forecast underscores exactly why our plans to increase productivity and ensure we get the very best deal with the EU are vitally important.”
However, these words may ring hollow for households enduring a living standards squeeze as inflation is outstripping wage rises for millions.
Many holidaymakers heading off on their summer break have also been left aghast at the poor exchange rate, with some people getting as little as €0.88 for £1. Sterling sunk lower after Brexit talks in Brussels last week were seen to have made little progress.
Meanwhile, low-cost carrier Ryanair stepped up its warning that Brexit could cause it to ground flights and cancel holidays unless a deal with the EU is struck.
“If we do not have certainty about the legal basis for the operation of flights between the UK and the EU by autumn 2018, we may be forced to cancel flights and move some, or all, of our UK-based aircraft to Continental Europe from April ’19 onwards,” it said as it published its latest figures.
They showed a 13 per cent rise in revenue to £1.7 billion in the three months to June 30, while profits soared 55 per cent to £356 million.
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