DHAKA: Britain’s economy faces a “prolonged period” of weaker growth as consumer spending slows and business curbs investment, according to a report.

Although the EY Item Club think tank predicts the economy will grow 1.9% this year, it expects that performance to fizzle out as inflation rises.

The economy’s stability since June’s Brexit vote was “deceptive”, EY said.

Meanwhile, a senior Bank of England official told the BBC that inflation may surpass its 2% target.

The Bank’s deputy governor Ben Broadbent told Radio 5 live that sterling’s weakness would fuel inflation, but that controlling prices with tighter monetary policy could hit growth and jobs.

The dilemma facing policymakers was underlined in the Item Club report.

It expects inflation to jump to 2.6% next year before easing back to 1.8% in 2018. That will cause growth in consumer spending to slow from an expected 2.5% this year to 0.5% in 2017 and 0.9% the year after, the report said.

Business investment is also forecast to fall due to uncertainty surrounding Britain’s future trading relationship with the EU, dropping 1.5% this year and more than 2% in 2017.

EY predicts that the impact of weaker consumer spending and falling investment will cause UK GDP growth to drop sharply to 0.8% next year, before expanding to 1.4% in 2018.

BDST: 1457 HRS, OCT 17, 2016
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