NIESR – UK growth unlikely to hit Government’s 2.8% target
The National Institute of Economic and Social Research (NIESR) says the Chancellor’s aim of raising UK economic growth to around 2.8% a year is “unlikely to be attained in the current global economic context”.
The Institute says elevated economic uncertainty will persist until the details of the UK’s future trade relationship with the EU are settled and, as a result, investment and productivity growth will pick up only gradually.
NIESR expects GDP to grow by around 1.5% in 2020 and 2021, unchanged from 2019, stating that economic conditions are “set to continue roughly as they have been with slow growth and output close to capacity”.
The March Budget is expected to be focused on ‘levelling up’ income levels across the United Kingdom. But NIESR says additional public investment of up to around £20 billion per year is “unlikely to have more than a modest impact on productivity and is not expected to offset the negative effect of Brexit”.
Garry Young, director of macroeconomic modelling and forecasting at NIESR, said: “Attempting to raise overall growth to around 2.75% a year at the same time as levelling up the regions will require significant improvements in productivity throughout the economy, especially where productivity has hitherto been lagging.
“Productivity growth would need to be faster in the poorer regions if overall growth is to meet the Chancellor’s aim while the regions are levelling up. A rough calculation suggests that if productivity in the London economy were to grow by only 1% a year, then it would need to grow by more than 3% a year in all other regions if the UK was to achieve productivity growth of 2.5% a year.”
Source: Financial Reporter