A drop in consumer spending is predicted to slow the growth of the economy as Brexit talks begin, according to the Confederation of British Industry (CBI).
The business lobby has predicted growth will be 1.6 per cent for 2017 and 1.4 per cent for 2018.
Although this is a slight upgrade on its previous forecast, the average quarterly growth is half the rate seen between 2013 and 2016.
UK exports are expected to increase due to the pound’s devaluation, dropping 15 per cent against the dollar since the Brexit vote.
Despite this boost, inflation and slow wage growth will damage consumer spend.
CBI director general Carolyn Fairbairn argues that the government needs to demonstrate the UK is still a “great place to do business” to restore confidence.
“People are already starting to feel the pinch. Tighter purse strings mean slower household spending growth,” she said.
“The less likely a Brexit deal starts to look, the harder it will be for firms to recruit and retain talent as well as push the button on big investment decisions. We must get Brexit right.”
The CBI’s outlook was supported by the Bank of England who have dropped their growth forecasts from two per cent to 1.9 per cent in 2017, while rising its inflation predictions from 2.4 per cent to 2.8 per cent.