The ICAEW Economic Update: UK, is based on the views of those running UK plc: ICAEW Chartered Accountants working in businesses of all types, across every economic sector and in all regions of the UK, surveyed through the quarterly ICAEW Business Confidence Monitor (BCM).

Q4 2019 Key findings:

Economic outlook

Brexit distortions fade, but underlying weakness in GDP growth persists

Interpreting the performance of the economy in the first half of this year was complicated by activity being successively boosted, then hindered, by companies stockpiling and then destocking because of Brexit-related contingency plans. Those distortions were less evident in Q3, but a soft underlying pace of expansion continued. GDP rose 0.3% on the quarter, below expectations, leaving the year-on-year rise at 1%, the weakest since Q1 2010.

Among the components of GDP, consumer spending expanded 0.4%, with the services sector growing by the same amount. And there was a sizeable positive contribution from net trade. But despite the imminence of another Brexit deadline at the end of October, the level of inventories dragged on output, while the manufacturing sector stagnated.

The outlook for growth in Q4 is poor. Declines in output in August and September offer a poor launchpad for the final quarter of the year. And retail sales fell by 0.1% in October, the third successive month in which sales have either been flat or have fallen. These developments are consistent with the message of the ICAEW Business Confidence Monitor™ (BCM) that the economy will flatline in the final three months of the year.

Stagnation in Q4 would cap GDP growth in 2019 at 1.2%, resulting in an underwhelming starting point for growth next year. So even with positives from greater political certainty stemming from December’s general election outcome and the high likelihood that the UK will now leave the EU in an orderly fashion in January, we expect growth next year of only 1%, which would be the slowest since 2009.