LONDON: UK companies are putting the brakes on investment spending, slowing the economic recovery amid concerns about the eurozone and general election, a business group has warned.
The government’s hope for trade and investment-led recovery remains elusive, leaving Britain’s fortunes heavily dependent on the consumer, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
The ICAEW lowered its 2015 growth forecasts for the UK economy from 2.5% to 2.4%. That would represent a slowdown compared with the 2.6% growth achieved in 2014 – the fastest rate of annual expansion since 2007 and the strongest among the G7 economies.
The institute sharply downgraded its expectations for growth in business investment this year from 7.2% to 5.2%, partly because oil and gas companies are reducing their spending in response to the slump in the price of crude.
Businesses also appear reluctant to invest while uncertainty continues both about the possibility of Greece leaving the eurozone and the slowdown in China. On Thursday China lowered its growth target to 7%, its slowest expansion for a quarter of a century.
Domestic concerns include the general election in May, which is leaving companies uncertain about the future of the government’s business policy and raises the possibility of the UK leaving the European Union after a referendum promised by David Cameron if the Tories win.
Michael Izza, ICAEW chief executive, 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.
