Fall in confidence will hit UK economic growth, says ICAEW

The Institute of Chartered Accountants in England and Wales (ICAEW) expects the UK economy to have grown by 2.4% this year before slowing to 2.1% in 2016.

The accountancy body warns that a slowdown in the wider economy could undermine Government plans for public spending and the aim to hit a budget surplus by 2020.

Three changes

The ICAEW points out that if their forecasts are correct, adjusted borrowing targets, cuts in spending or tax increases could all be needed to keep things on track.

The main areas of concern surround the effects of a slowdown on business investment, which is already slowing in a sign of a decline in business confidence.

This has led the respected body, which has over 128000 members in England and Wales, to revise down its forecasts of business investment growth this year as well as the next, with 5.5% estimated for 2015 and 4.9% estimated for 2016 being the new figures.

Good news

However, there is more positive news, with predictions that the unemployment rate will continue to fall even more to average 4.5% in 2016, due to a continued expansion in the economy.

A knock on effect of this is likely to see wages "continue to grow robustly over the coming year", according to the ICAEW.

Skill shortages are also contributing to wage growth, particularly in areas such as construction where earnings in Q3 2015 were 6% higher in Q3 2014 year on year.