UK to lag at bottom of European growth league after Brexit - forecast

The UK is lagging behind EU neighbours economically and is set to remain at the bottom of the growth league in the years after Brexit, according to new forecasts from the European Commission.

The Commission warned that Britain's economic prospects could be even gloomier, as its forecasts are based on the assumption of a "benign" result to Brexit talks, with trading relations between the UK and EU remaining unchanged.

Risks to the UK economy from a bad Brexit outcome are "large and predominantly to the downside", the Commission said in its autumn Economic Forecast.

The report, released in Brussels, downgraded UK GDP growth for 2018 to 1.3% - from 1.5% in the spring - and predicted it would decline further to 1.2% in both 2019 and 2020.

UK growth is forecast to be well below the 2.2% forecast for the EU27 in 2018, 2.0% in 2019 and 1.9% in 2020.

Italy (1.1%) and Denmark (1.2%) prop up the table in 2018, but the UK takes bottom slot in the following two years and remains behind Germany (1.7% in 2020) and France (1.6%).

In the years before the 2016 EU referendum, the UK matched or outstripped the EU growth average, outperforming countries like Germany, France and the Netherlands with GDP growth of 2.9% in 2014 and 2.3% in 2015, compared with 1.6% and 2.3% for the EU27.

But since the referendum it has slumped to the lower reaches of the growth table, recording 1.8% in 2016 and 1.7% in 2017 against EU27 averages of 2.1% and 2.6%.

The European Commission's forecast said UK economic growth was "currently subdued and expected to remain so over the forecast horizon".

Wage growth was predicted to be "modest" and consumer confidence "weak", resulting in households saving whatever cash they can.

Consumption was projected to be "weak" and business investment "constrained", and the Commission forecast decreased exports and a modest rise in unemployment over the three-year period.