Tuesday 6 December 2016

Irish economy to slow on weaker UK forecast

Published 24/11/2016 | 02:30

British Chancellor of the Exchequer Philip Hammond leaves 11
Downing Street in London for the House of Commons as he
prepares to deliver his Autumn Statement. Photo: PA
British Chancellor of the Exchequer Philip Hammond leaves 11 Downing Street in London for the House of Commons as he prepares to deliver his Autumn Statement. Photo: PA

The British government has cut its growth forecast for next year in the wake of the Brexit vote, which could have a small knock-on effect on Ireland's growth prospects.

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The UK economy is now expected to grow by 1.4pc next year - down from the previous 2.2pc forecast.

The Finance Department has stated that a full 1pc reduction in UK GDP has the potential to shave 0.2pc off Irish growth over a two-year period.

Therefore the UK downgrade has the potential to have a marginal impact on Irish growth.

In his Autumn Statement, UK Chancellor of the Exchequer Philip Hammond reiterated the government's plans to cut corporation tax to 17pc by 2020 and be the lowest in the G20.

But there was no mention of suggestions earlier this week that the UK could go lower in the wake of Donald Trump's campaign proposal to slash the US rate to as low as 15pc.

Mr Hammond said that Brexit made it "more urgent than ever" to invest in tackling Britain's long-term weaknesses, including one of the worst productivity growth rates among rich economies. "Our task now is to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow."

Meanwhile, the Brexit vote has contributed to a slowing in the consumer economy here across all sectors over the summer months, a report claims.

This softening trend has affected almost all categories of services and retail, in what the report claims could be due to the 'Brexit effect'.

The assessment is presented in the latest Consumer Market Monitor (CMM) published by the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School.

Mary Lambkin, UCD Smurfit School marketing professor, and one of the monitor's authors, said other key economic indicators remain strong.

"A reassuring factor is that the fundamental factors underpinning the consumer economy are still very strong and should provide a counter-balance to any external shocks. In particular, employment stands at 2.015 million right now," she said.

Tom Trainor, Marketing Institute chief executive, said the findings remind us of the need for vigilance.

Irish Independent

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