UK economy likely to grow 1.0 percent this year and next following high-level uncertainties, says DZ Bank

The United Kingdom is expected to grow 1.0 percent this year and next, down from the already mediocre previous figure of 1.3 percent, according to the latest research report from DZ Bank. If Brussels and London fail to agree on a “sensible solution” for future trade relationships, such as remaining in the customs union, a high level of uncertainty will persist for some considerable time and will limit the recovery potential for the British economy.

The British economy virtually stagnated at the beginning of this year. According to a preliminary official estimate, economic growth slowed to only 0.1 in the first quarter compared to the previous three months – the lowest growth for five years. The strongest braking effect came from construction output, which contracted more strongly than at any time since the beginning of 2012.

However, in the service sector, hotels and restaurants also reported a very negative result again, while retail merely stagnated. The manufacturing sector also clearly lost momentum, with a paltry growth of 0.2 percent. Unusually cold winter weather in the British Isles undoubtedly acted as a growth dampener – particularly for the construction sector and private consumption.

However, extraordinary, Brexit-related economic conditions have also persisted, and have now been weighing on growth for more than a year. Buoyant exports have mitigated the negative impact so far.

"However, this 'buffer' effect will also now disappear if the impetus for the global economy weakens in response to heightened uncertainty," the report added.

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