Relax! New report predicts UK will avoid severe recession and house pricing crash post-Brexit vote
The UK can breathe a collective sigh of relief today, as a report revealed the country should avoid a drastic downturn following the Brexit vote.
Although the figures from PwC forecast a slowdown in GDP growth for the next few years, they did not project very negative growth.
The accountancy giant predicted GDP growth of 1.6 per cent for 2016 following the Brexit vote, compared with growth of 2.2 per cent in 2015. The firm pointed to a forecast fall in business investment as the key culprit behind the less optimistic figures.
Meanwhile, growth for 2017 was estimated between 1.5 per cent and minus one per cent, but even the negative dip would not be as sharp as falls which have been felt in previous years.
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"I certainly don't expect anything as severe as the global financial crisis," John Hawksworth, chief economist at PwC, told City A.M. "That was really a systematic international problem for the financial system and I think that's been adequately safeguarded against. I think the issue is more there is this uncertainty about longer-term trade relationships affecting investment rather than there's any danger of an imminent banking crisis like we saw in 2008."
Source: PwC
Likewise, PwC predicted a tail-off in house price growth, but, again, it's unlikely to drop off a cliff.
The professional services firm calculated house prices could be eight per cent – or £17,000 – lower in 2018 than they could have been if vote Remain had prevailed last month, while growth could dip to around one per cent in 2017 before regaining pace to around four per cent in 2018.
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However, the slowdown will be felt differently across the country. While house prices in the north east are forecast to be just £8,000 lower in 2018 than they would have been without the Brexit vote, property prices in London are expected to be £60,000 lower than they would have otherwise.
Source: PwC analysis in main scenario using ONS house price index data
"There is probably more downside risk around the London market, particularly around central London, given the reliance on international investors," added Hawksworth.
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According the Hawksworth, businesses have been keeping their cool so far.
"We don't sense any great panic when we're talking to our clients," he said. "There was an initial shock but most people are adjusting to that and taking a sensible approach of assessing how it will affect their business but it's mostly a long-term change."