Are general election worries slowing down UK business growth?

Are general election worries slowing down UK business growth?

Amidst general election and eurozone worries, it seems that UK businesses are slowing down their spending, which could be having an effect on our economic recovery. 

ICAEW lowered growth forecasts for 2015

The Institute of Chartered Accountants in England and Wales (ICAEW) has lowered its 2015 growth forecasts for the UK economy from 2.5% to 2.4%.

Compared to 2014, this is a slowdown – last year, growth achieved was 2.6%, which was the fastest rate of annual growth since 2007. It was also the strongest of all the G7 economies.

Oil company spend, eurozone and China concerns

The ICAEW downgraded its forecasts for growth in business investment this year from 7.2% to 5.2%, in part because of the fact that oil and gas companies are reducing spend due to the slump in the price of crude.

The possibility of Greece leaving the eurozone and the slowdown in China are also having an impact on UK business spending – recently, China reduced its growth target to 7%, which is its slowest expansion rate for twenty five years.

UK General election and EU

Here in the UK, our own concerns around the general election outcome in May are leaving SMEs uncertain about future government policies and also the possibility of leaving the EU after a referendum if the Conservatives win.

ICAEW chief executive, Michael Izza, said;

“The potential slowdown in GDP growth is a clear sign that UK firms are pressing the pause button on their attempts to drive economic growth. Their exposure to international risks, ranging from the eurozone crisis to China’s cooling economy, has subdued their capital spending plans for the year ahead.

“We cannot overstate the effect of the general election either. Businesses remain concerned about the potential makeup of the next government and its policy towards business. Any steer towards a potential exit from the EU is also causing anxiety. All this means consumers are key to the recovery.”

 “Low inflation is ensuring the first annual increase in employee real incomes since the financial crisis, and the average worker will have more money to spend. However, the government must ensure that growth isn’t predicated solely on a rise in household debt, otherwise we could find ourselves back where we were before the financial crisis.”

The current government has argued that to move forward, the UK economy must steer away from its reliance on consumer debt and move more towards investment, manufacturing and exports.

Do you think that the chancellor’s target back in 2012 to double UK exports to £1tn by 2020 is still within reach? Let us know your thoughts on Twitter @OmnitasTax or Facebook!