The United Kingdom is projected to have the slowest-growing economy of any European Union member state when it leaves the bloc in 2019, according to the European Commission.
The forecasts coming out of Brussels predict that U.K. economic growth will fall to a rate of 1.1 percent by 2019. This lags the ideal growth rate of 1.9 percent for European countries.
The commission also projected a growth rate of 1.5 percent by the end of the current calendar year, which is 0.3 percent lower than last year.
The pessimistic projections come as a result of Brexit-related uncertainty based on assumptions of weak export growth, poor business investment, and a moderated household market that are all expected to hurt the U.K. economy.
On the other hand, the Eurozone has collectively witnessed a year of strong economic growth. The commission raised its GDP forecast by 0.5 percent for the calendar year to 2.2 percent, the Eurozone’s fastest growth rate since 2007. Further projections have forecasted a growth rate of 2.1 percent for the bloc in 2018 and a 1.9 percent in 2019.
The commission has not been the only body to provide projections on the future of the U.K. economy. The Organization for Economic Cooperation (OECD) predicted in October that U.K. GDP growth will be 1.6 percent before experiencing a rapid decline to just 1 percent in 2018. Though somewhat similar to the commission’s projections, the OECD’s forecasts are based on the expectation that the U.K. and the EU will not agree on a trade deal as part of Brexit negotiations.
On the other hand, the Bank of England (BoE) has a more positive outlook for the future, expecting GDP growth for this year and next year to be 1.6 percent and increasing the estimate to 1.7 percent for 2019—very different from either the OECD or the commission’s projections. The BoE estimates, however, rely on the assumption that the U.K. will encounter a smooth Brexit, which is not a certainty at this point.
Despite these forecasts for a rather weak U.K. economy, the commission has made it clear that its projections are dependent on a “purely technical assumption” that the U.K. and the European Union will continue trading after 2019, thus allowing for error on either side of its forecast. Moreover, regarding the role of Brexit in the projections, the commission has made it clear that its assumptions are “for forecasting purposes only and [have]no bearing on the talks underway in the context of the Article 50 process.”
Furthermore, emphasizing the situation in the U.K., the commission noted that “investment growth is forecast to weaken in 2018, as many firms are likely to continue deferring investments in the face of uncertainty.” Considering that much of the British economy operates under both domestic and foreign investment enterprises, a weakening of investment growth could have great impact on the economic engine of the nation.