Channel Island businesses "need to be nimble in face of change"

Thursday 15 February 2018

Channel Island businesses are to benefit from falling inflation and increased consumer spending power tells visiting UK Economic Advisor.

At presentations hosted by professional services firm, EY, Channel Islands businesses heard the results of EY ITEM Club's Winter Forecast.

Martin Beck, EY ITEM Club’s Senior Economic Advisor, informed the audiences that the UK economy is "over the worst" but is struggling to accelerate compared to its global counterparts and is unlikely to see significant growth in 2018. 

In presentations over two consecutive days in Guernsey and Jersey respectively, representatives from the local financial services industry learnt that the UK’s GDP growth in 2017 was 1.8%, which was better than widely expected.

However, this compared unfavourably with 2017 GDP growth of 2.5% for the Eurozone, 2.3% for the US and an estimated 3.0% globally. Although data was not available for Guernsey and Jersey for 2017, it was reflected upon that growth had lagged behind the UK’s for a number of years.

The momentum from a reasonable performance in 2017, an improving outlook for consumer spending and the increased likelihood of a near-term Brexit transition arrangement were explained by Martin Beck, EY ITEM Club’s Senior Economic Advisor, as all offering support to UK growth this year. The EY ITEM Club has nudged up its UK GDP forecasts for 2018 to 1.7%, compared to the 1.4% it was predicting in its Autumn Forecast in October last year. However, further out, the UK’s limited productivity performance and ongoing Brexit and political uncertainties will see the UK achieve only ‘mid-range growth’.

The EY ITEM Club has modestly downgraded its expectation of the UK’s productivity performance, although it remains more optimistic than the Office for Budget Responsibility’s latest forecast. An improvement over the second half of last year also fuels belief there has been an appreciable cyclical element to UK productivity and that there is scope for a rebound over the medium term. Specifically, EY ITEM Club forecasts output per hour to rise 0.9% in 2018 and then 1.3% annually during 2019-2021.