Davy revises down UK growth forecast

Davy Stockbrokers has revised down its UK GDP growth forecast to 1pc this year.

It had previously forecast GPD growth of 1.8pc for 2019.

The revision comes as Brexit, tighter financial conditions and political uncertainties are now weighing on GDP growth in the UK, chief economist at Davy, Conall MacCoille, said in a note.

“We expect a ‘soft patch’ in [the first half of] 2019 so that GDP growth slows to 0.1-0.2pc per quarter. On Brexit, we expect the status quo to be maintained via a deal or an extension of Article 50,” Mr MacCoille said.

Looking to next year and Davy forecasts 1.4pc GDP growth, with activity still held back by weak investment and productivity growth.

“Recent surveys have painted a dour outlook for the UK economy,” Mr MacCoille continued.

“The January PMI surveys signalled the first cut in employment in six years. A Deloitte survey indicated that 82pc of chief financial officers now plan to cut back on capital expenditure, which we expect to contract by 3.8pc in 2019, offset by the planned 6pc rise in public investment.”

However, the stockbrokers added that sentiment in the UK could bounce back quickly if the March 29th Brexit ‘cliff edge’ is avoided.

“We expect the most likely outcome to be an extension of Article 50, providing little boost to sentiment,” Mr MacCoille said.

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