Businesses may need to take a greater ‘leap of faith’ and invest for the future despite the current uncertainty according to ICAEW. In its latest Economic Forecast, it predicts GDP growth of 1.6 per cent in both 2017 and 2018, 0.8 per cent slower than the average for the past three years. Despite the lack of certainty on Brexit, the economic conditions for capital investment remain positive and would help drive growth.
Michael Izza, ICAEW Chief Executive, said: “Businesses are in no rush to make major capital investments at the moment. With corporate balance sheets and profitability healthy, borrowing costs low and demand from the UK’s major trading partners strong, businesses could be investing now for the future. Without this investment, growth will continue to slow, especially as we can no longer rely on consumers to keep spending at the rate they were.
“The squeeze on household incomes is set to continue for the next few years at least and there is little that Government can do to reduce inflation, other than cutting indirect taxes.
“Given that consumer spending added an average 1.5 per cent to growth from 2014-2016 and this contribution is likely to slow to 1.1 per cent in 2017 and 0.3 per cent in 2018, it is now up to businesses to support more growth.
“They need to look for opportunities in overseas markets, make efficiency savings and invest in innovation, talent, new products and services to create a longer term return.”